Every May first, we witness workers and trade unions march through the stadium in recognition of the Labour Day celebrations. The podium turns purple, and the day is celebrated with speeches, cultural performances, and other events that highlight the importance of the labour movement and the contributions of workers.
It is also not uncommon to see politicians use the opportunity to demonstrate their support for workers. Both parties advocate better working conditions, higher wages and other labour-related issues.
While reflecting on the progress made in improving working conditions, wages and benefits, we should also acknowledge the ongoing challenges faced by workers. One is financial insecurity, particularly when it comes to retirement savings.
If there is anything the Covid-19 pandemic taught us is that life can be unpredictable, and events beyond our control can impact our financial stability. Inflation, for instance, has been on an upward trend.
As the cost of living continues to rise, retirees are finding it increasingly challenging to make ends meet. Additionally, as people age, their health may deteriorate, and the cost of medical care can increase significantly. To cover the cost of these and other unforeseen expenses retirees may need to take up loans.
Granted, unforeseeable circumstances can lead to financial difficulties, however, some mistakes we make during our working years may also have a significant impact on retirement finances.
In my working life I have seen people saving for their retirement much later in life, others assume that social security benefits will be enough to support them in retirement and many end up relying on their families for financial support.
Amongst those who decide to achieve their long-term goals through investment, are individuals who opt for high-risk investment. This often comes with higher levels of uncertainty. Getting into debt can also make it challenging to save for retirement, as well as making it harder to make ends meet, further derailing retirement plans.
The government has introduced several initiatives aimed at supporting pensioners, notably the Inua Jamii Cash Transfer Programme, Uwezo Fund, NSSF and NHIF, independently aimed at enabling the elderly to access basic needs, fund their businesses, maintain a basic standard of living in retirement and enrol to a medical scheme.
Even with the introduction of these initiatives, inadequate funding for the programmes, poor implementation, or limited coverage have been given as reasons for the failure to meet retirees’ needs.
To meet short-term financial needs retirees have turned to pension-backed loans from banks and Saccos, despite the eligibility criteria and loan terms proving difficult to meet.
Banks and Saccos have been extending loans to customers but have largely neglected this customer segment. The possible reasons may be uncertainty around pension incomes attributed to economic downturns, financial institutions’ preference for the traditional form of collateral, and customers perceived to have advanced in age being viewed as high-risk.
The question we ought to ask ourselves is, how then do we scale up pension borrowing to ensure that retirees have access to affordable credit and financial support in retirement?
Obtaining a microfinance licence can be a complex and costly process, particularly for smaller, newer institutions and those limited in scope in that they cannot offer credit. Regulatory bodies should facilitate them to get microfinance licences by simplifying their requirements or by providing a streamlined process for the institutions to obtain credit licences.
In the banking circle, it is not uncommon to see borrowers making uninformed decisions, particularly if they do not have details such as repayment schedules, interest rates and penalties on missed payments.
It is for this reason that we cannot underestimate the impact of financial literacy. Financial literacy is particularly important in this day when we have exploitative advance credit options such as logbook loans, mobile lending, credit from lenders operating outside the formal financial systems and betting.
With access to formal pension schemes being limited, it is difficult to access credit in retirement. The government and private sector should therefore work towards increasing pension coverage by encouraging more employers to offer pension schemes.
Efforts should also come from workers. Diversify your investment portfolio and plan for unexpected expenses and healthcare costs as financial difficulties are often traced back to mistakes made during working years.
While we may be earners, eventually, we will stop working to enjoy our golden years. Let us reflect on the broader issue of retirement security.
