Mr Sundeep Raichura, the CEO of Alexander Forbes. Photo/FILE
Pension fund managers are pushing for an increase in tax breaks to registered schemes in a fresh campaign to encourage savings.
In the last eight years, the State has allowed up to Sh20,000 contribution to a registered pension scheme a month without attracting tax.
According to the pension fund trustees, adjusting the limit upwards would encourage workers to save more for retirement.
“Young people should also start saving for their retirement early in order to have a smooth sailing after they exit employment,” said Mr Sundeep Raichura, the CEO of Alexander Forbes, at a pension fund investment conference in Nairobi last week.
Speaking on the sidelines, Treasury secretary Henry Rotich said he would engage the industry to discuss a possible review of the current tax breaks as well as other reforms to grow the industry.
“It is important to dialogue on how we can make our pension system better, more responsive and how we can harness the enormous potential of the pension industry for our economic development,” he said.
Pension funds collectively hold assets in excess of Sh650 billion.
Mr Raichura noted that for any contractual pension scheme to succeed, it must enjoy adequate support. The pension fund trustees have continuously championed for substantial tax breaks.
“We hope that as part of the current review of the Income Tax Act, a review is undertaken of the current tax breaks with a view to increasing pension savings,” he said.
Mr Rotich said the government plans to set up a contributory pension scheme for civil servants so that when they retire, taxpayers do not bear the burden of financing their retirement benefits as is currently the case.
“We will implement the civil servants pension scheme in the course of this year,” he said.
He added that the plan is to have retirees withdraw benefits from the new pension fund rather than from taxpayers.
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