Struggling employers are holding at least Sh2.3 billion in pension contributions to various schemes since the onset of coronavirus in Kenya in March.
Retirement Benefits Authority (RBA) chief executive Nzomo Mutuku said the hospitality sector is the most affected.
He said the pandemic has weighed down the industry’s long-term assets and cash deposits that stand at Sh1.3 trillion, with schemes suspending contributions for three to nine months.
“The airline sector, hotels, tour agencies, medical firms and schools request most suspensions. Some have however resumed contributions after their suspension periods expired,’’ Mutuku said.
He spoke on Tuesday at the launch of a post-retirement insurance product by Sanlam Life and Minet Kenya dubbed RetireMed.
The pension regulator in April introduced temporary relief measures that allowed cash-strapped companies to apply for discontinuation of employer-retirement contributions to pension schemes until the coronavirus pandemic eases.
The Sh1.3 trillion pensions industry is facing its toughest test with some schemes reporting defaults by employers, a scenario that could adversely affect the ability to meet member expectations during the tough period.
Mutuku was however confident that as the economy slowly improves potential contributors will ride on the amended pension laws to save for the future.
Among the changes is that members of a savings scheme can now access up to 40 per cent of their savings to buy a home.
He hailed the post-retirement medical insurance product launched by the two firms, saying it will help lower the high medical dependence ratio by retirees in the country.
The product will provide medical insurance cover for those aged 55 years and above, allowing them to maximise their pension benefits.
“The flexibility of RetireMed to accommodate informal workers is in line with the RBA Strategic Plan 2019-2024 with a focus on bringing more individuals in the informal sector under a retirement benefits scheme,’’ Mutuku said.
The product administers both individuals and group schemes; the entry ages are between 18 years and 59 years.
Members can have various options to access their funds at retirement, including – accumulated funds at retirement to be used to purchase an annuity from an insurance company.
The annuity proceeds are then used to make payments during the life of the member.
Sanlam Life acting CEO Kevin Mworia said the product was informed by Kenya’s life expectancy rate, which has been increasing consistently since 2015 leading to a wider pool of retirees.
Respondents to the AKI Kenya Retirement Preparedness Survey2019 confirmed that they were not ready for retirement. Only 29 per cent of the respondents felt that they are well prepared for retirement.
Statistics show that less than 10 per cent of people retire financially independent.
According to Minet Kenya MD Sammy Muthui, contributions for the product are inclusive and can target a specific level of medical cover at retirement.
“Members can choose various outpatient and inpatient covers that best meets their needs, and we will be able to advise on the required regular contributions,’’ Muthui said.