Kenyans banking on children for old age support

Sixty per cent of adult Kenyans are banking on support from their children and the State in old age underlining the depth of economic dependency.

A survey by Old Mutual Insurance Group shows residents of Mombasa were the most dependent-minded at 90 per cent compared to 53 per cent in Nairobi, 52 per cent in Eldoret and 48 per cent in Nakuru.

The survey indicates the majority of Kenyans — 43 per cent — save to educate their children with only 12 per cent saving towards retirement. The investment in education fuels the expectation of benefiting from the child.

“Twenty-five per cent said that they expect the government to look after them if they are unable to take care of themselves,” reads part of the survey.

Four out of every 10 interviewed said that they planned to continue working for pay even in retirement which shows the unpreparedness of Kenyans for old age.

Retirement Benefits Authority (RBA) has disclosed plans to compel adults register in the National Social Security Fund as they take national identity cards.

The authority is concerned pension coverage has remained stagnant at 15 per cent of the working population despite government efforts to widen the contribution bracket. 

Old Mutual found that 72 per cent of those with a retirement fund were not even aware of the value of their savings.

Inflation has also hit savings while a third of the interviewees in Mombasa are saving less than last year due to the economic downturn in the tourism reliant region. Tourism has been greatly hurt by travel advisories issued by major markets such as America and Britain.

Savings account was the most used store of value followed by chamaas (investment clubs) which are preferred for their ease of access and low, if any, transaction fees.

The survey found the majority of Kenyans rely on television news to make their investment decisions with financial advisers being the least preferred at three per cent.

Word of mouth is another common source of investment information which explains why most Kenyans tend to copy paste business ventures.

More than half said they did not understand the language used by financial institutions, especially in their contract forms. A quarter of those interviewed opted to invest where the returns were guaranteed even at the risk of inflation while 19 per cent had a huge appetite for risk.

A quarter was extremely confident of making good savings and investments decisions, which prevents them from reaching out for help from professionals.
Insurance companies running unit trust are now structuring products so as to match the investors risk appetite.

Old Mutual Securities said is looking at investing in assets that have outperformed inflation rates in the past.

“Property is an area of interest because of customer expectations to protect their investments,” said Rueben Java, chief executive of the South African-based insurance group.

The firm which has been expanding having recently acquired a majority stake in Faulu Kenya hinted it would be looking for more acquisitions in short-term business where it is unrepresented.