Covid: Save more than usual for retirement


Those close to retirement should prepare by saving more now. PHOTO | FOTOSEARCH

The Retirement Benefits Authority (RBA) recently celebrated their 20th anniversary as regulator.

A lot has been achieved over the years such as increase in pensions coverage and income adequacy, governance policy reforms which have seen the industry assets grow to Sh1.3 billion.

Even with such good progress, disruptions happen that make us rethink our way of doing things. Covid-19 is one of them.

In 2020, close to 1.7 million jobs were lost according to the Kenya National Bureau of Statistics, with the youth most affected. While ageing parents have mostly relied on the younger working population for finances given that the average income replacement ratio on retirement is below 40 percent against the recommended 70 percent ratio, the pandemic turned the tables.

The Covid-19 pandemic has given a wake-up call, demanding various interventions, including the following.

Post-Retirement Healthcare: Medical needs are the core expense for retirees. The post-retirement medical cover offered by some pension schemes should, in policy, be shifted from voluntary to mandatory contributions.

Taxation: Update the law to further cushion retirees. They should not overburdened with the tax liability.

Retirement Payout: Retirees should consult credible financial advisers and have mandatory financial literacy programmes to help them figure out the most suitable payout option upon retirement.

Retirement credit: Players such as trustees, administrators and the regulator, should develop products that allow retirees to access affordable credit.

Emergency kitty for elderly: Apart from the social safety fund for elderly persons aged above 70 years, the Treasury should set up a separate emergency kitty with an investment structure that grows the funds.

As reforms are rolled out, those close to retirement should prepare by saving more now.