The Association of Retirement Benefits Schemes (ARBS) and the Retirement Benefit Authority (RBA) have decried the rising amount of unremitted retirement funds which currently stand at Ksh 65 billion.
The two agencies are now calling for a law to have pensions mainly for civil servants deducted from the Treasury to avoid the current crisis that is facing retirees.
Jane Nzau, the chair of the Association of Retirement Benefit Schemes decried the low uptake of retirement pension schemes in the country which stands at 26%ercent.
She welcomed the move to scale up uptake of pensions in the informal sector with products that are designed to match the behaviors and the characters of the informal sector and through education and financial literacy.
Addressing the press on the sidelines of the 4th ARBS conference in Naivasha, Nzau said that since the inception of the pension schemes in 2000, the sector continued to record growth with assets under management by the end of June standing at Ksh 3.1 trillion.
However, she said the sector penetration partly stood at 26 percent who are mostly in the public sector with 74% of the informal sector being locked out.
“Post-retirement medical cover is the biggest challenge with our retirees and the ongoing regulations for post-retirement medical funds will cure the gap,” she said.
According to John Kaya from RBA, they were proposing for the deductions to be done directly from the exchequer to the respective schemes and other statutory organizations.
Kaya said public institutions were the major culprits which had deducted members’ savings but failed to remit them to the respective retirement schemes.
“We are in the process of reviewing our act to incorporate a partnership with the KRA who can use their respective powers as agency powers to be able to collect some of these unlimited contributions,” said Kaya.
“The total and remitted contributions for both the principal which are the actual contribution plus interest stands at Ksh 65 billion”, he added.
Kaya said the sector growth in terms of the number of service providers stands at 70 with over 4M active members and 8 million members in retirement.
Daniel Mainga, the vice chairperson, Association of Retirement Benefit Schemes the regulations for post-retirement medical funds seems to enhance governance issues.
He said the government has introduced some incentives including giving tax incentives of up to Ksh 15,000 per month for any member who is saving through a post-retirement medical fund.
“If you contribute to a pension scheme and also to a post-retirement medical fund, one has a total of 45,000 as a tax allowable benefit on a monthly basis, which is a good improvement” said Mainga.
