A greater number of Kenyan retirees are opting for income drawdown to access their funds as an alternative to guaranteed annuities, this was revealed during a retirement planning conference hosted by Liberty Life at a Nairobi hotel.
This growing demand for the income drawdown is mainly due to its flexibility. It allows retirees to choose how they want their accumulated retirement funds invested and how much they want to be receiving, either monthly or quarterly. The remaining sum is invested to continue earning income.
Retirement Benefits Authority’s (RBA) Supervision Deputy Director Jackson Nguthu said the overriding benefits of the income drawdown have enabled its massive growth, with 16 registered income drawdown funds holding a total of Kshs 16 billion in assets.
“To regulate the management of these funds we have forwarded a draft regulation to National Treasury that is subject to consideration for gazettement,” said Nguthu
He was speaking at the retirement planning conference sponsored by Liberty Life to discuss life in retirement with industry stakeholders and soon–to–be retirees.
The training comes on the back of industry efforts to increase the number of Kenyans contributing to their post-retirement welfare – with only 8 million Kenyans out of the 28 million in the Kenyan workforce saving for their retirement at present.
Given the economy’s ongoing exposure to macroeconomic shocks, Liberty Life’s Managing Director Abel Munda urged retirees not to surrender their insurance policies.
“We encourage retirees to have a long-term perspective given the current market outlook in order to fully profit from their insurance investments,” Munda said.
The retirement conference focused on assisting prospective retirees to take hold of their future perspectives, review their present career roadmaps, and prepare themselves for their non-employment era.
Launched in form of an in-person workshop, the retirement conference focused on key topics such as the state of the retirement sector, taxation of retirement benefits, retirement income streams, social-physical and mental state during retirement, benefit and estate planning and the retirement process.
According to RBA’s surveys on retirees, only 30% of the retirees interviewed had attended a retirement planning training. 86% of those who had attended found that the training was beneficial and had an impact on their retirement.
According to the Q4’2021 Insurance Regulatory Authority (IRA) and the Kenya National Bureau of Statistics (KNBS) 2022 Economic Survey, Kenya’s insurance penetration was 2.3% as of FY’2021, which is still low compared to other significant economies.
The low penetration rate, which is below the 7.4% global average, is caused by the fact that insurance is still viewed as a luxury and is only frequently purchased when it is necessary or required by law.
Notably, despite the economic recovery that resulted in a stronger business environment, insurance penetration remained constant at 2.3% in 2021, the same as what was observed in 2020.