NAIROBI, Kenya, July 4 – The uptake of pension among workers in the informal sector remains low what pension specialists have attributed to an acute shortfall in existing social protection policies.
According to Emwealth Pension Manager Bancy Kaleli, a majority of workers in the informal sector fail to honour monthly pension contributions due to lack of understanding on the need to save for retirement, exposing millions of citizens to poverty in old age.
A survey conducted by Emwealth, a local financial services provider, 55 per cent of workers under the informal sector fail to save in a pension scheme.
“Majority of workers under the informal sector, lack knowledge of what pension is and why is it important when retiring and as a country we also lack capacity in government and private sector as well,” the pension expert says.
This, according to Kaleli, contributes to the old generation depending on their young family members who are struggling to make ends meet.
“The first risk that one attracts due to lack of saving is poverty and it’s very unfortunate to have people at that age being unable to cater for their day to day needs then you become a burden to your children and the society,” she adds.
Kaleli recommends the adoption of latest solutions such as mobile pension products which will address the needs of informal workers through catering for their present financial needs and allow members to plan for a comfortable retirement.
In May the Retirements Benefits Authority (RBA) rolled out a new savings product that would help create a pension pool for the informal sector after the Mbao Pension Plan stalled.
Under the plan, informal sector workers could save Sh20 daily for retirement.
RBA Chief Executive Officer Nzomo Mutuku mentioned that the product had a broader offering compared to just savings that would boost the informal sector players to borrow against what they have set aside for retirement.
“We want to have a single package that even includes a funeral package that we think would attract the informal sector, which is the biggest employer,” he commented during the launch of RBA’s 2019-2024 Strategic Plan in May.