8 out of 10 Kenyans risk sinking into poverty upon retirement

15 February 2018 Consultancy.africa 3 min. read

New research has revealed that a majority of the Kenyan working age population, including those approaching the latter stages of their careers, are currently lacking concrete plans for retirement. More than 85% of the current workforce might face poverty upon retiring, says financial services firm Enwealth.

In terms of demographics, the African continent has the youngest population in the world, most of which is currently on the threshold of entering the workforce. With such a substantial productive population, the continent is likely to grow in significance as a centre of economic activity.

In keeping with the continental trend, Kenya has an overwhelmingly young population. The country, which is the 7th richest country in Africa in terms of GDP, has 19 million people below the age of 14, accounting for 40% of the population. Another 19% of the population falls in the age group of 15-24 years, while nearly 34% is aged between 24 and 54.

As a result, the country is set to become highly productive at the turn of the next decade, with a broadly diversified economy and relatively well-developed infrastructure. However, not all sections of the population will share the benefits of this prosperity.

Nearly 4% of the population will cross the retirement age of 65 over the next decade, while 3% has already crossed it. A new report from Kenyan consulting firm Enwealth has revealed that these sections of the population, and those in one category younger, do not have the financial security, or even plans to attain the same, to last them during retirement.

Investment distribution by age group

Designed as a financial services firm, Enwealth offers services in pension scheme administration, retirement benefits consulting, social welfare training, corporate trusteeship, insurance, and a number of other post-retirement domains.

The report was drafted based on responses from more than 500 professionals, 86% of whom expressed minimal confidence about their ability to support themselves during retirement. Only one in seven respondents conveyed confidence in their retirement plans, despite a sizeable portion of them having pension schemes in place.

As per the report, the average worker in Kenya is currently saving only a third of what they would require to survive in retirement. Where an income replacement rate of 75% is recommended around the world, the current replacement ratio of income after retirement stands at 55%.

The issue, according to the firm, lies in the lack of planning, and not in the absence of schemes. 70% of those surveyed were contributing to pension schemes, demonstrating intent to save. Moreover, of the respondents who had received training in financial literacy over the last year, 56% were able to calculate their retirement needs, demonstrating that the problem lay in the absence of such skills on a larger scale.

Within the age-group that is approaching the retirement age (51-60), 20% of the people surveyed have their money invested in pension schemes, while 27% hold investments in real estate, and 24% hold investments in land. Other areas of investment include life insurance, financial instruments, ongoing business, and cash in bank.