Markets & Finance

Pension manager seeks incentives to boost uptake

forbes

Alexander Forbes retirement fund board executive director James Olubayi, trustees chairperson Lucy Kambuni and head of umbrella division Angela Okinda. PHOTO | SALATON NJAU

The National Treasury should offer tax incentives to the pension industry to increase membership, which has stagnated at 15 per cent of the working population, a top pension manager has said.

The management of Alexander Forbes has proposed a review of the maximum tax-exempt contribution, which has been capped at Sh20,000 in the last 11 years.

“We don’t know how the figure was arrived at but being a monetary amount its value today is not what it was then due to inflation,” said the company’s executive director, James Olubayi.

“We would prescribe a percentage so that it is based on an individual’s income,” he added. Pension savings are meant to help contributors retain their lifestyles in retirement.

The firm also proposed a review in the age of pensioners who are tax-exempt, noting that most people were retiring at the age of 55 years.

The government exempts pension payments made to people over the age of 65, condemning those who exit early to taxation.

Mr Olubayi noted that few people were willing to contribute voluntarily to their old age even where the fund managers posted attractive returns due to lack of government incentive.

Alexander Forbes is the second largest fund in terms of membership in the country after government-backed National Social Security Fund (NSSF). It manages 170 employers’ pension schemes, which collect Sh3.3 billion in new funds annually.

The government had sought to expand individual contributions to the mandatory NSSF, but the Act was challenged in court delaying its implementation.

Industry regulator, the Retirement Benefits Authority (RBA), has been advocating for all Kenyans to be automatically registered in the statutory pension scheme as they turn 18 and acquire national identification cards to increase the number of persons saving for old age.