Post-retirement medical funds attract few takersFriday April 08 2022
Saving through stand-alone post-retirement medical funds has suffered low uptake three years after coming to force largely due to conflicting budget needs and inadequate awareness campaigns, players in the pension industry have said.
Post-Retirement Medical Fund (PRMF) Regulations that were passed in October 2018 allow pension schemes and employers to set up medical funds for members or employees to save for post-retirement healthcare insurance.
Under the rules, workers have the option of saving through a medical fund without being required to be members of the sponsoring pension scheme.
“The positive is that we have had products that have been developed and designed to respond to these opportunities in the market which we didn’t have before,” Enwealth Financial Services chief executive Simon Wafubwa said.
“The concern that pulls us back is inadequacy of cash within the pension contributions to also fund healthcare. Balancing both contributions is not easy.”
Contributions are made while a member is in active employment, but medical insurance benefits become effective when one retires and exits the medical cover provided by the employer.
The regulations that gave birth to the voluntary post-retirement medical schemes followed changes to the Retirement Benefits Act in 2016.
“This provision is in response to requests from the market. The previous regulation was only allowing you to contribute to your own scheme but we were informed that some schemes do not want to set up medical funds so they are denying their members this benefit,” RBA chief manager for market conduct Anne Mugo said in a statement.
Findings of a recent survey by Strathmore University and Enwealth Financial Services showed that about 41 percent of retirees pay for medical bills out of pocket. The data showed that a third of pensioners have private medical insurance, with a fifth relying on the National Health Insurance Fund. (NHIF).
Due to higher risk, older people have to pay higher premiums to get medical insurance with some service providers not offering medical cover to people aged above 65.
The medical funds were in 2018 exempted from the retirement benefits levy in what was intended to encourage growth in contributions.
“Medical insurance cover is one of the key pillars to a successful retirement. According to statistics, 60 percent of an individual’s medical expenses are incurred after the retirement age as this age group is highly vulnerable to diseases and the need for hospitalisation increases,” Mr Wafubwa said.
“There is now a lot of sensitisation and awareness going on within pension schemes.”