The Retirement Benefits Authority (RBA) recently set a target in its Strategic Plan 2024-2029: to increase pension coverage to 34 percent of the working population by 2029.
Achieving this ambitious goal will require deliberate steps, significant effort, and innovative solutions.
One of the key steps previously taken to improve pension coverage has been increasing financial awareness and educating individuals on importance of saving for retirement.
Over the past few years, this message has been effectively conveyed through the RBA, private institutions, mainstream media, and social media.
While awareness has undoubtedly increased, there is a pressing need for more comprehensive measures alongside these educational programmes.
The challenge lies in the fact that rising living costs and limited income have significantly reduced people’s ability to save.
Even with a strong understanding of retirement benefits, many individuals find it difficult to set aside substantial amounts for their future due to constrained disposable income.
Addressing this issue requires not only increased awareness but also tangible measures to empower citizens, particularly young people, with better job opportunities.
Job creation, however, is highly dependent on a vibrant private sector especially small and medium enterprises (SMEs).
Unfortunately, with the current interest rates, SMEs are struggling to stay afloat due to the high cost of credit, yet they employ a huge percentage of the population.
This is where mechanisms such as creating an SME credit-access fund as an alternative investment asset class for pension schemes can come in handy.
With Kenya’s pension assets currently valued at around Sh1.7 trillion, an allocation of about five percent to the SME credit-access fund would translate to about Kes90 Billion availed for lending to SMEs.
By offering more favourable borrowing terms to SMEs that contribute to the pension sector, these businesses can be encouraged to participate in the pension system.
Overall, this can play a transformative role in strengthening the SMEs financially by scaling down the cost of credit, they stay afloat, create more job opportunities and eventually increasing the overall pension coverage.
Pension reward structures are increasingly under scrutiny, particularly with regard to their appeal and effectiveness for newer generations.
The traditional pension terms, which often include defined benefit schemes and rigid contribution requirements, may no longer meet the needs of today’s employees, particularly Millennials and Gen Z.
The younger generation has different expectations and financial realities. To ensure that pension plans remain a valuable and motivating part of the compensation package, they must be reimagined to meet the needs of the modern workforce.
By implementing innovative measures and addressing immediate needs of younger generations, we can create a more effective and appealing pension system that supports individuals throughout their working lives and into retirement.
The writer is the CEO Enwealth Financial Services Ltd
