Personal Finance

Why you need to embrace pensions for a financially secure future


Pension funds concept. FILE PHOTO | NMG

Throughout history, mankind has faced the fact that life’s security was not assured. Be it from lack of survival sustaining resources or from experiencing the vicarious forces of Mother Nature.

With the advent of industrialization and technological evolutions, family and community structures have broken down. In Africa, this has further been accelerated by the pressures of urbanization, the disintegration of extended families, the abolishment of social and cultural norms as well as poverty and social disharmony.

We also suffer from behavioral myopia in terms of saving habits which exacerbates the issue of security to a new high. Thus, there is no safety net in place to cater for loss or reduction of productive capacity in one's old age.

Social protection through social security policies that are aligned with economic labor policies is an economic and social necessity. In Kenya, this gap has been met by both the formal sector of salaried staff and the informal sector through insurance Retirement Benefits Schemes.

For instance, Old Mutual has been able to provide savings and retirement benefits policies that have provided security to many, and for generations.

This has been realized by ensuring management, investments and governance of retirement benefits funds by our skilled professionals. Success is evidenced by the growth of the total funds under the Group Holding management to over 260 billion by December 2021.

With a passion for ensuring that life and indeed financial security is not curtailed at 60 years, the Pensions team has strived through diverse campaigns, continuous technical training sessions, provision of interactive client service platforms, dedicated client specific employee benefits programs as well as collaborations with the regulator events to ensure that saving for retirement becomes an imperative part of each employee’s and employer’s agenda within their sphere of reach.

The first benefit of this venture accrues to staff leaving employment. In 2021 UAP-Old mutual group paid out billions in such benefits.

The lump-sum cash benefit received is utilized in business startups or capital influx that allow for one to diversify their portfolio as well as venture into entrepreneurship. Many members have utilized principles of investment and long-term savings imparted during member education held by Old Mutual while they were employed.

Benefits paid from Retirement Benefits were key in supporting the rejuvenation of business ventures, whether new or old aver the Covid-19 pandemic ravaged our economic landscape in 2019. Additionally, they were crucial in sustaining livelihoods where income levels dropped in both the formal and informal sectors of the economy.

In addition, pensions are attractive tax shelters which encourage savings and accumulation of investment returns without attracting current taxations. This is advantageous as access to benefits is at the age of 60, when the advantages accrue.

in full. In comparison, when one saves through enhanced wages one is bound to incur taxation from the wages themselves, and income arising from their savings thereof. Furthermore, Old Mutual through prudent investments seeks to raise the income replacement ratios to a level of above 60 percent of earnings.

This increase, if achieved, will go far in reducing old-age poverty. Overall, preparation by planning for retirement ensures that one has financial freedom, and can cater for the increase in the cost of living.

The most long-term benefit is imparted to Retirees, who convert their retirement savings to a regular income stream for life secured by the company. This removal of uncertainty offers the benefit of Stability, Health and Comfort in old age.

Old Mutual will secure the retiree by offering options where the retiree can increase their annual income year on year and hedge against inflation. In addition, one can purchase insurance or settle their medical bill from the monthly income and thus ensure the longevity of life.

Regular communication is maintained with the retiree through monthly updates, in the future it is noted that value add will be gained through regional clinics where interactive forums are held not only for the retiree but also for those close to retirement.

Old Mutual believes that testimonials are the best way to confirm that it pays to save while working to support consumption in post-retirement