Kenyans are retiring with only 22 per cent of their pre-retirement salaries. FILE PHOTO | NMG
What you need to know:
We can apply mandatory national social security saving similar to Value Added Tax on products and services for all Kenyans.
The Constitution of Kenya (2010) under the Article 43 of Bill of Rights asserts the right for every person to social security and binds the State to provide appropriate social security to persons who are unable to support themselves and their dependents.
This right is closely linked to other social protection rights, including the right to healthcare, human dignity, reasonable working conditions, and access to justice.
Article 21 establishes the progressive realisation of social and economic rights and obligates the State to “observe, respect, protect, promote, and fulfill the rights and fundamental freedoms in the Bill of Rights.”
From a social security perspective, the challenges include, but are not necessarily limited to providing pension, sickness benefits, maternity protection, employment injury and disease protection (workers’ compensation), survivors’ benefits, disability coverage, family benefits, and unemployment protection.
At the moment, the existing social protection initiatives include education bursaries, school feeding programmes, fee waivers in public health facilities, Orphans and Vulnerable Children’s (OVC) programme, older persons cash transfer and youth enterprise fund among others.
Figures from the United Nations Department of Economic and Social Affairs reveal that by 2030, the number of Kenyans aged 60 years and above will rise from 1.6 million currently to about 3.4 million.
The ensuing “demographic time bomb” will mean that less is saved for investment both at the family level and nationally, limiting the economy’s capacity to create sustainable jobs.
Now is the time for the country to Institute universal pension coverage for all citizens through introducing pension levy on mandatory goods and services to realise mandatory State social security as provided in Article 43 of the Constitution.
The government should look at total income and explore establishing the universal fund by allocating a percentage of the national budget to go into that fund for universal pension and medical. It could also look at a levy on goods that are vital such as airtime, a small portion of which can be built over time.
Norway for example has used their oil as a source of sovereign fund, which they invest in major projects such as infrastructure funding, low cost housing yet it serves as a source of funds for those who retire. The universal fund project should ideally be implemented as a flagship project under Vision 2030 to give it the status and attention it deserves.
The existing social protection initiatives are quite disjointed and there is need for a policy review in order to benefit all Kenyans especially the vulnerable ones.
We can apply mandatory national social security saving similar to Value Added Tax on products and services for all Kenyans. This can be applied through certain classes of good and services.
The government should at the same time assess the feasibility of introducing a basic universal grant financed from the national budget that would go into the universal old age pension fund.
If broader reforms to introduce higher mandatory contributions are introduced, the regulatory capacity will need to be correspondingly increased.
The scope can be widened by encouraging innovation in the social security sector through adoption of technology to widen social security coverage and ease participation by all working Kenyans.
Even if we took the average Kenyan earning a dollar a day and asked them to save at least 10 per cent i.e. Sh10 per day or Sh300 per month, we can raise at least Sh7.5 billion from 25 million working Kenyans.
As part of encouraging Kenyans to join, we need to introduce a social security card that will be used as a mandatory document for accessing government services. The more people participate the bigger the pool and the more successful it will be.
Stringent rules on the investment of mandatory contributions in pension schemes will be essential to ensure risk- free investments and enhance sustainability.
Likewise, we will also require stringent regulation on access to the universal pension benefit by pension beneficiaries in order to safeguard the “sacredness of the fund.”
The country with the right structures in place can afford social security. We are operating below the global savings rate at less than 12 per cent.
Through such interventions, we should be able to increase this to at least 20 per cent national savings while ensuing all Kenyans live a comfortable retirement.
Hosea Kili is Group Managing Director of CPF and Chairman of Association of Pension Administrators of Kenya (APAK).
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