Pension Schemes In Kenya | A Comprehensive Write-up for Pensioners

Knowing that getting old is mandatory is a great sign that you should prepare for it today. You should have it at the back of your mind that the position you are in today is not everlasting. Someone was there before you, so it’s your certificate and your leadership skills that earned you that position. At this point, it is better for you to start planning for your old age before it gets dark because no one will ever remain young forever.

Pension schemes in Kenya are useful for the survival of the aged. This is one of the most reasons why you are encouraged to enroll in the pension scheme which will save you in your old age. Preferably, the pension scheme in Kenya provides that you contribute regularly to the pension scheme throughout your working life. When you hit that retirement age, through your pension plan, you will have saved so much and your money will have earned interest in time.

In this article, you will be given detailed information about Pension, Who a Pensioner is, What a pension scheme is, Types of pension schemes in Kenya, A list of pension schemes in Kenya, and lots more.

Keep reading this article to learn and discover more informative ideas about pension schemes in Kenya

What Is Pension

A pension is a fund into which a sum of money is added during an employee’s employment years and from which payments are drawn to support the person’s retirement from work in the form of periodic payments.

Who Is A Pensioner

A pensioner is a person who collects a pension, most commonly because of retirement from the workforce.

What Is A Pension Scheme

In simple terms, a pension scheme is just a type of savings plan to help you save money for later life. It also has favourable tax treatment compared to other forms of savings.

Now, that everything has been detailed down for your understanding, I believe this article is making more sense to you to read more.

Types Of Pension Schemes In Kenya

Before getting into the details of a pension plan, it is important to understand the pension definition. This refers to the regular payment by the state to people above retirement age. As said earlier, other than the National Savings and Security Fund, it is a national scheme whose main objective is to provide basic financial security benefits to Kenyans upon retirement, having been set up as a provident pension fund to provide benefits in the form of lump-sum payments. The pension scheme can be classified as;

• Individual pension plan or
• Occupational pension plan

The elementary difference between the above two categories is the initiator of the scheme.

An Individual pension plan is usually set up by an individual to make contributions on his/her own behalf towards saving for retirement while,

An occupational pension plan is set up by an employer who makes contributions on behalf of their employees for the provision of retirement benefits. In most instances, the employee also makes contributions (together with the employer) in an occupational scheme.

It is to be noted that it’s not mandatory for an employer to provide a pension scheme to his/her employees. However, if an employer provides a pension scheme, they are obligated to comply with the legislation of the pension system in Kenya and the established rules of the pension schemes.

List Of Pension Schemes In Kenya

Below is a comprehensively compiled list of pension schemes in Kenya with the best retirement benefits that one can enroll in Kenya. The pension schemes are registered with the Retirement Benefits Authority (RBA).

• Blue Small and Medium Enterprises, Jua Kali Individual Retirement Benefits Scheme (Mbao Pension Plan)
• Jubilee Insurance Company Personal Pension Plan
• Old Mutual Individual Retirement Benefits Scheme
• Octagon Personal Pension Scheme
• Alexander Forbes (Vuna Pension Plan)
• UAP Individual Pension Plan
• Britam Pension Scheme
• ICEA Lion Individual Retirement Benefits Scheme
• Amana Personal Pension Plan
• Zimele Personal Pension Plan

Other than the above, other pension scheme that can be good option for the pension funds are;

• APA Life
• In time Personal Pension Plan
• Apollo Insurance Company Individual pension Arrangement
• CPF Individual Pension Scheme
• Blue shield Personal Pension Plan
• Dry Associates Personal Provident Plan
• British American Provident Fund
• Kenya power pension fund
• Chancery Personal Pension Plan
• Eagle Africa Maisha Milele Pension Plan
• CFC Life Individual pension Pension plan
• In wealth Personal Pension Scheme
• CIC Pension Plan
• Kenyan Alliance Insurance Co. Ltd. Individual Retirement Benefits Scheme
• GA Life Personal Pension Plan
• Kenindia Assurance Company Personal Pension Plan
• Kenyan Alliance Insurance
• Company Individual Retirement Benefits Scheme
• Madison Insurance Personal Pension Plan
• The Monarch Personal Pension Plan
• Pan Africa Life Personal Pension Plan
• Pioneer Assurance Company Personal Pension
• The Heritage All Company Individual Retirement Benefits Scheme
• Co-op Trust Individual Retirement Benefits Scheme

County Pension Funds

The council of governors at Kenya Methodist University in Meru launched a County Pension Fund-CPF. It was officially launched by His Excellency Peter Munya, former governor of Meru, in the presence of His Excellency Wycliffe Oparanya, the governor of Kakamega.

This comes after a state-backed bill had proposed an umbrella pension scheme with better benefits for the county employees. The bill also proposed punitive sanctions for the counties that fail to remit the worker’s contributions.

The proposal, which had been endorsed by the Treasury Cabinet Secretary, makes it mandatory for all county employees to contribute to the scheme associated with the county governments. Sources indicate that the County Pension Fund bill was in tandem with the treasury’s quest to reform the pension system in Kenya. Among some of the changes, the bill is making to entice members is the lowering of the minimum deductions that employees are supposed to make from the current 12% to 7.5%

Counties have been remitting a higher rate for each employee and will keep doing so at the same rate as the County Pension Fund scheme bill 2018. It addresses a persistent problem from the county authority failing to remit deductions made from employees’ salaries raising the amount of the unremitted pension.

The biggest score, however, is that county employees will now be able to afford a life insurance cover through their annual contributions to the scheme.

The County Pension Fund is a contributory pension scheme for county employees in which, like the rest of the umbrella pension schemes in the Kenyan system, both the employer and employee contribute to it for the benefit of the employee.

The Calculation Of Pension In Kenya

A look at the Kenya pension calculation will help shed more light on this matter. Presently, as per the Old NSSF Act, statutory contributions to the fund are set at 10% of an employees’ pay. A monetary ceiling was set on the maximum combined contribution as 400 Kenya shillings per month. With the New NSSF Act, which received assent from the president on 24th December, the statutory contributions are set at 12% of the employee’s pay, 6 percent which is contributed by the employee.

Contributions are divided into two tiers.

• Tier 1 contributions will be based on pensionable earnings up to the lower earnings limit.
• Tier 2 contributions are based on pensionable earnings above the lower earnings limit.

It’s to be understood, however, that the lower earnings limit is a figure that is set by the Cabinet Secretary and is published monthly.

Defined Pension

You would ask yourself: Which are these rules that apply to the level at which pensions are funded, and how can an employer determine how much to fund a defined benefit pension plan annually? Let’s get to understand these;

Pension schemes are funded by contributions. Under a given contribution scheme, the level at which benefits are funded is determined in various ways:

• The employer compares and analyses the level of contributions that other schemes have set within the pension industry so as to provide competition.
• The employer considers the future benefits that he intends on making available to his or her employees.
• The employer also considers factors relating to the employees’ profiles such as age and the type of employees.

The above will then provide a guide on how much contribution he or she can make towards each employee. The employer can also be advised by an actuary who can make a conclusion based on statistical data of the employees and arrive at a well-calculated figure.

Defined pension schemes’ funding aims to provide the members with the promised benefit at the end of their service. The determination of the funding level can be left to the discretion of the employer or sponsor.

However, in practice, it can be calculated by the multiple lengths of one’s service and the final pensionable salary. The figure normally arrived at is that where the employer intends to replace 0.2 percent of the employee’s final pensionable salary for every year of work.

Termination Of A Pension Plan

Customarily, an employer will be considered to have terminated a plan only in the following events.

• Discontinuing of payments of contributions
• The employer ceases to exist or for any other reason ceases to operate and some other statutory body has not been empowered to undertake the rights and obligations of the employer
• The employer is going into liquidation other than for the purpose of reconstruction or merging with any other company
• The contributions being paid by the employer and reasonably expected from it in the future are so low as to affect the long-term financial position of the pension scheme
• The employer fails to remedy any breach of its obligations under this trust deed or the rules within the required number of days

Let’s not ignore that some employers close their plans to future accrual and continue to fund the scheme. This option is available to defined pension schemes and they will continue operating as closed schemes.

When doing this, the employer must give written notice to trustees indicating intent to discontinue contributions. The trustees shall then take into account the relevant circumstances and ask an actuary to propose an arrangement providing for the pension funds and contributions of the scheme. This agreement will be submitted to the employer and trustees to determine whether the scheme will be wound up.

The trustees must pass a resolution that is to be approved by the Authority.

A liquidator shall be appointed to wind up the affairs of the plan and is to submit to the Authority preliminary accounts signed and certified by him as a correct record. This statement of preliminary accounts shall also be submitted to members. Fees payable to the liquidator shall be borne by the scheme.

A notice stating that the preliminary accounts above are open for inspection by interested persons shall be published in the Gazette. You may wonder: What happens to the pension funds in case of employer’s insolvency? The response here is, the pension system in Kenya is regulated and therefore, the pension funds (Minimum Funding Level and Winding up of Schemes) regulations govern the winding up of schemes.

Regulation 5(7) provides that, in the winding up of a plan, the value of interests and pension funds of the members are ascertained in such manner as the court may direct. Pension funds accrued will not be affected during employer insolvency. The total money in the fund shall be applied to provide benefits for all members on an equitable basis.

Members will have the option of transferring their pension funds to another registered pension scheme. Regulation 9(4) provides that members will also have the option of being issued guarantees from the new scheme they are transferring to if they were affected by the winding up of their previous pension scheme. The liquidator shall be required to provide for the distribution of surpluses under Regulation 5(8A).

Pension schemes can also be established as irrevocable trusts ensuring the assets of the beneficiaries are protected and cannot revert back to the employer in instances of insolvency. Section 24(1) of the Act provides for this.

The regulation also protects employees who move from one job to another in look for greener pasture. In practice, where an employer is acquired and the acquiring body does not undertake the rights of the employer then the trust is considered to have been terminated and the benefits accrued become due.

If the new employer takes on the rights, they are to prepare a deed of adherence undertaking the rights of the previous employer. The deed sets out that the new employer takes on the years of service and will allow the old members to participate in the new scheme. Members can transfer their benefits fully to other schemes where their pensionable service under the previous employer will be regarded as service with the new employer.

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