The Treasury has lined up a series of reforms to the country’s retirement benefits policy to boost access for informal, diaspora, and short-term workers, which are set to cost up to Sh255 million by December next year.
In Kenya, an estimated 3.5 million people, or 25 percent of the workforce, are covered by retirement benefit schemes, according to the Retirement Benefits Authority (RBA), meaning the majority of Kenyans will retire poor. The new measures outlined in the newly published National Retirement Benefits Policy (NRBP) seek to solve multiple challenges limiting access and discouraging contribution by workers.
In the new policy, the State will spend up to Sh110 million on strategies geared towards onboarding more informal sector employees through, among other things, developing targeted pension products and a campaign to encourage more uptake.
Additionally, at least Sh15 million will be spent on an awareness programme for Kenyans in the diaspora, and also for providing incentives and developing infrastructure to extend coverage to those living abroad.
Another Sh15 million will be used to integrate financial literacy plans into the basic education curriculum, a move that is expected to enhance knowledge on retirement benefits.
Sh100 million is expected to be used in amending laws, including tax laws, to grow the uptake of pension products, and also for reviewing the progress of the outcomes of the reforms.
Based on the policy document, the interventions should significantly boost the number of Kenyans covered by a pension scheme within the next five years before a review.
Currently, pension coverage is concentrated on formal employees, despite the availability of the National Social Security Fund (NSSF), which is a mandatory contributory scheme that should cover informal sector workers.
“Although the NSSF scheme is mandatory, most of the employers in the informal sector and self-employed workers have neither registered nor contributed to the scheme due to low compliance level,” says the Treasury.
“The current regulatory framework does not effectively support the establishment of the informal sector schemes. Therefore, there is a need for a legislative framework which promotes innovation and development of flexible and responsive retirement benefits products and enforcement of the NSSF Act.”
