Kenyans using pensions for school fees, housing, raising alarm on retirement readiness
After school fees and housing, 15 per cent of retirees channel their savings into farming, while 14 per cent start businesses.
Many retirees in Kenya are turning to their pension lump sums to cover needs that should ideally have been addressed before retirement, a new report from the Retirement Benefits Authority has revealed, raising concern over the country’s retirement readiness and savings culture.
According to the data, the two most common uses of retirement payouts are paying school fees and building houses, each consuming 16 per cent of the benefits.
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While putting up a house may be seen as a stable investment, the equal spending on school fees points to continued financial dependency by family members, undermining the goal of retirement savings.
After school fees and housing, 15 per cent of retirees channel their savings into farming, while 14 per cent start businesses.
Though these ventures may aim to provide income in retirement, they expose pensioners to market and weather risks, often without guaranteed returns.
Other uses include buying land (10 per cent), investing in real estate (8 per cent), and putting money into bank deposits (7 per cent).
These lower-risk options may offer safety but provide limited growth, especially in the face of rising living and healthcare costs. Just two per cent of retirees invested in shares, suggesting either a lack of awareness or fear of high-risk financial products.
The report also shows that a vast majority of employees are not making any extra efforts to secure their retirement.
Only 19 per cent made voluntary contributions, while 81 per cent relied entirely on employer-mandated pension savings.
This raises concerns that most Kenyans may retire without enough funds to maintain a comfortable lifestyle.
When looking at other forms of savings, 49 per cent of retirees said they had money in Saccos, making them the most preferred savings option outside pensions.
In comparison, only 20 per cent had savings in bank accounts, 5 per cent had insurance-based savings, and 3 per cent in other forms. Alarmingly, 23 per cent had no other savings at all.
The findings paint a picture of a workforce that enters retirement while still carrying the weight of financial obligations and without enough preparation for the long term.
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