Kenya’s pension landscape is undergoing significant transformations aimed at enhancing financial security for retirees.
In August 2024, the National Assembly passed the Pensions (Amendment) Bill, 2022, signalling a legislative commitment to strengthening retirement benefits by ensuring timely pension disbursements within 30 days and requiring government departments to submit retirement documents at least 90 days in advance to prevent delays.
Concurrently, the Retirement Benefits Authority (RBA) unveiled its 2024-2029 Strategic Plan, outlining key initiatives to expand pension coverage from 26 percent to 34 percent, leverage technology for improved service delivery, enhance financial literacy, and strengthen regulatory frameworks.
Together, these measures aim to enhance financial security for retirees, instill confidence in the pension system, and promote sustainability in the sector.
However, challenges persist, as highlighted in a recent pensioner survey by RBA revealing a mixed bag of experiences among pensioners, underscoring the need for continued reforms to ensure adequacy and inclusivity in retirement provisions.
Some most common financial challenges faced by retirees are escalating medical bills, financial support of adult children and other dependents, and payment of school fees and college tuition.
Caught between the challenges of inadequate retirement savings and rising college tuition costs, many parents may worry about their ability to retire comfortably when the time comes. As parents, we want to help our children get the best education in life and eventually go to college so how do we juggle the two?
The truth is, saving for your retirement and your child’s education at the same time can be daunting but we should not give in since it is possible to reach both goals if you make some smart choices now.
The first step towards planning your financial future is determining your goals that need financing. When it comes to your retirement and college education for your children, you need to estimate how many years you have until your retirement.
After you determine your financial goals, the next step is to take deliberate actions that will ensure that you reach your target. These actions might appear punitive and painful in the beginning, but that’s what you need to reach your goal.
Since we are faced with fluctuating inflation and financial instabilities, the insurance provider you settle on will be your next important decision.
Since for instance, the amount you can contribute toward insurance might fluctuate due to changing fortunes, you need a provider who has options like having the insured opt to voluntarily terminate the policy before maturity and withdraw the surrender value. Alternatively, the insured may opt to reduce the sum assured in proportion to the premium he can pay and vice versa.
Even though most parents are often too willing to sacrifice their retirement security for their children’s education, that does not always have to be the unfortunate case.
You can make your retirement a priority and set up college savings and insurance plans that can help you cover higher education costs once you are out of work.
In addition, a well-structured post-retirement medical policy is essential to ensure continued healthcare coverage.
Planning allows you to secure a medical plan that meets your needs, providing peace of mind as you transition into retirement.
It is for these reasons that parents need to clearly choose an insurance provider whose policy has enough elbow room to accommodate their financial capabilities while offering them tailor-made solutions.
An insurance policy is only worth its while if it can assure maximised returns on the client’s savings. Other features that a policy choice should offer include comprehensive life cover, additional benefits like funeral cover, joint savings advantages where one enjoys a premium discount when signing up with their spouse, flexibility for life's uncertainties, and room to adjust premiums with inflation or decrease them during financial hiccups.
It is said that the road does not tell the traveler what lies ahead hence the importance of saving for a rainy day. With the right policy, this should not be a problem because you can get additional benefits like permanent total disability cover in the event of a disability or incapacitation arising out of an illness or accident.
Clients can also enjoy critical illness cover which pays out a percentage of the sum assured on first diagnosis of debilitating diseases like cancer, heart and cardiovascular ailments, stroke, major organ failure, and a myriad of terminal illnesses.
Insurance companies have guaranteed the client the sum assured plus these additional benefits. The policy is designed to cater savings for future events such as retirement and college tuition whilst providing a life cover should the unfortunate event happen allowing one’s dependents to access the full benefits that had been envisioned by the policy owner.
The best way to accomplish both goals of paying for our children’s education and saving for our retirement is planning. The earlier you invest in a college savings plan, the better.
That is where retirement planning comes into play. It does not matter at what point you are in your life, setting aside money now means you will have less to worry about later.
The writer is the Managing Director and Principal Officer of Liberty Life Kenya.
