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Reuben Mwambingu @reubenmwambingu

The government has been urged to undertake bolder readjustment of the pension policy to make contributions compulsory and also to significantly increase the tax breaks for the sector.

Players in the industry observed that over 85 per cent of Kenyan workforce is not in the pension schemes and  are therefore likely to become a burden to their families post-retirement.

Sundeep Raichura, Group CEO of Zamara, a financial services firm that specialises in actuarial, pensions, medical and insurance solutions, said that only 15 per cent of the workforce is in pension schemes.

At this rate, Raichura observed the future for Kenyan retirees is bleak and there is need for the government to come up with ways of encouraging citizens to inculcate the culture of saving for the future.

“Majority of Kenyans are not in retirement schemes. This is a very worrying trend because it means that this population is a burden in waiting,”  he said.

Raichura who spoke on the sidelines of the just concluded Zamara 8th Annual retirement conference in Mombasa attended by over 250 delegates said there are chances that this segment of population will become dependent on their families in their old age. 

Raichura also said there was an urgent need to extend pension coverage to the uncovered informal sector, especially with 85 per cent of the workforce in the informal sector.

“An informal sector worker has as much if not higher need than their formal sector counterpart to provide for or be protected against the loss of income earning capacity in old age” he added.

At the same time, Retirement Benefits Authority (RBA) CEO Nzomo Mutuku was at pains during the meeting to explain what the authority was doing to cushion retirees from being heavily taxed and instead allow them to enjoy their pension in peace.

Final payments

The delegates were of the view that it is wrong for the taxman to target pensions for deductions considering that these are the final payments for the elderly and that taxation of pensions amounts to mistreatment of the elderly.

“When people are retiring and are getting their last payment, why can’t they be given tax relief so that they retire in peace?

You will find that the elderly are mistreated to an extent that a person who is supposed to get say Sh 5 million as their final pay, ends up getting Sh 1 million and something.

This is wrong and there is a need to relook into this so that what remains with the government is reduced,” said Luke Otieno from National Cereal and Produce Board.

In response, RBA chief executive Nzomo Mutuku said the authority has been pushing for more tax incentives even though the push has never sailed through.

“We have been pushing for the tax incentives but they have not been successful. We shall continue to push for more tax incentives including waiving tax for people aged 65 and above,” he said.