Personal Finance

Benefits of the youth starting to save early for retirement


Some people live longer post-retirement and may find themselves running without money. FILE PHOTO | NMG

In its May 2019 report, Cytonn Investments says the Retirement Benefits Industry in Kenya has undergone major changes in the last few years, which has led to a pension coverage of about 20 percent of the current working population. But according to the Organisation for Economic Co-operation and Development (OECD) 2017 in Kenya, the retirement benefits assets as a percentage of GDP stood at 13.4 percent, compared to more developed markets like the USA at 84.1 percent and the UK at 105.3 percent.

This generally points towards a low penetration of retirement benefits products in Kenya, with the informal sector’s participation in the retirement benefits industry standing at less than one percent.

For the youth in their early 20s, retirement appears such a distant occurrence that they can only consider as surreal.

What they do not know is that time flies so fast that saving as you approach retirement becomes more difficult if one does not start early.

Whereas it is not lost on observers that most of the young people joining the job market have to grapple with the challenge of repaying their college loans, it is worth noting that even a small amount saved for retirement can make a huge difference in your future.

One of the advantages of saving early for retirement is compound interest, the process by which a sum of money grows exponentially over time.

Starting early means that less money is set aside for the goal, as compound interest benefits those who invest over a longer period of time.

There is simply no such thing as being too young to contribute to your pension — it’s a case of the sooner, the better.

The longer you spend contributing to your pension, the more money you will have saved by retirement.

What the youth need to be clear about is that contributing to a pension scheme cannot be equated to spending, but rather, saving money to spend in retirement.

Those with workplace pension schemes have the benefit of having their contributions matched by their employers. Still, there are individual pension schemes open to both those in employment or self-employment.

With a minimum of Sh500 per month, a contributor can get a product whose effect goes a long way in preparing retirement.


There is no denying that setting aside a portion of one’s salary can be a challenge.

Many people want to contribute the maximum permitted by their plans but find it takes a huge chunk of their salaries.

This challenge can be surmounted either by increasing one’s contributions over time, especially upon receipt of a pay rise.

By doing this, you’ll be taking home a higher salary while your retirement nest benefits from increased contributions.

Ultimately, the benefits of saving early for retirement cannot be overstated.

Some people live longer post-retirement and may find themselves running without money.

Secondly, to avoid being a burden to your children in retirement, you should strive as much as possible to have your own regular income, through a pension scheme.


The bottom line is that you'll be able to afford to do everything you always dreamed of doing when you finally retire, be it buying expensive gifts, offering your loved ones a good life or travelling around the world.

Saving in a pension plan also provides for a lump sum benefit income for surviving dependents in the event of your death, besides being one of the most secure forms of savings.

Retirement Benefits Schemes also offer tax reliefs during the saving period and at the point of accessing the benefits particularly at retirement.

Lest we forget, saving for retirement is not just for your benefit.

It’s for the benefit of your family and loved ones as well.

Providing for your family and nurturing future generations are responsibilities that don’t end at retirement age.

For the youth still mulling over the possibility of investing in retirement, there is no better time than the present.

The writer is acting managing director, CIC Life Assurance Ltd.