• Most retirees spend the bulk of their savings within three years of withdrawing their pension funds after retirement
• While there is a tendency of retirees venturing into business with retirement money, the study shows that many ventures started with retirement proceeds usually fail
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Retired workers need about 60 per cent of their former salary per month to maintain existing living standards, a new survey by the Association of Kenya Insurers (AKI) has shown.
The survey has however shown that living a modest lifestyle after retirement may be impossible due to lack of preparedness and retirement investment plans.
“The Employees Retirement Benefits Fund is an important source of retirement income, but it is often not enough to finance the total retirement needs," AKI chief executive Tom Gichuhi said.
He said most retirees spend the bulk of their savings within three years of withdrawing their pension funds after retirement.
The report also suggests that most Kenyans hope to retire at the age of 58.
The survey observed that no one expects to be poor when they retire, it however raised concerns on the low levels of preparedness.
Only a third of the country’s population, 29 per cent, is adequately prepared for retirement.
This leaves the majority not ready despite them mentioning they had hoped to have saved enough for life after retirement.
Due to this, 47 per cent expect personal savings to deal with unexpected events during retirement such as chronic illness while 25 per cent may meet healthcare costs as it is factored in their retirement plan.
The low preparedness for retirement has been blamed on factors including the high cost of living (66 per cent), not having enough income to save (61 per cent), lack of saving discipline (56 per cent), lack of financial advice and lack of investment ideas or options (47 per cent).
The report also indicates that most Kenyans want to be involved in income-generating activities and do not favour the option of relying on their children to take care of them in retirement.
While there is a tendency of retirees venturing into business with retirement money, the study shows that many ventures started with retirement proceeds usually fail after a few years due to lack of management experience and knowledge of the business or industry.
“One way of avoiding this is by using annuities to provide a guaranteed stream of income for the rest of the member’s life in exchange for an up-front lump sum (the premium),” Gichuhi said.
According to the survey, the National Social Security Fund (NSSF) received the highest level of awareness as a retirement savings plan amongst all participants from urban and rural areas in varied age groups.
Total awareness of NSSF was at 93 per cent.
Other savings plans are known in older generations including employer-provided benefits (54 per cent), personal contribution to private pension (50 per cent), personal contribution to workplace pension (42 per cent) and annuities at 19 per cent.
The survey conducted in April featured interviewers from Nairobi, Machakos, Nyeri, Mombasa, Kisumu, Meru, Vihiga, Eldoret, Kericho, and Garissa.
The rural population was more prepared (32 per cent) than the urban population (27 per cent).
Females reported being more prepared than their male counterparts at 31 per cent and 27 per cent respectively.