A significant number of Kenyans earning modest wages are retiring without enough savings, raising concerns about poverty among the elderly. A survey by ICEA Lion Group shows that workers earning less than Sh50,000 a month are the least prepared for retirement, highlighting a widening gap in pension coverage.
The study found that only 27 percent of those earning below Sh30,000 are contributing to a pension scheme. Among people earning between Sh30,000 and Sh50,000, nearly half – 45 percent – have no pension savings.
In contrast, 56 percent of workers earning Sh50,001 to Sh100,000 save for retirement, while individuals earning over Sh500,000 have the highest participation at 89 percent.
Experts warn that without savings, low-income earners face financial difficulties as they age, especially in a society where younger family members are no longer the main source of support. Many retirees or those nearing the official retirement age of 60 have no choice but to continue working.
“Pension savings appear to increase with increase in monthly income. Similarly, the savings increase with age apart from those over 60 and still working,” the survey notes.
The survey also highlights alternative saving methods among Kenyans. “A significant portion of the currently working population has alternative savings with fixed deposits and other formal investments with saccos being the most popular choices. Retirees mostly had alternative savings in Saccos and fixed deposits and other formal investments,” the report adds.
The lack of pension coverage is most common in the informal sector, where contributions to retirement schemes are not compulsory.
Findings show that formal sector employees save an average of Sh4,733 monthly, while informal sector workers manage only Sh1,421, a level insufficient for a secure retirement.
The survey interviewed 1,300 people from both formal and informal employment in Nairobi, Mombasa, Eldoret, Nakuru, Nyeri and Kisumu. About 45 percent of respondents save through the National Social Security Fund, making it the most common option over employer-backed schemes.
NSSF contributions were previously Sh400 per month, with retirees receiving less than Sh250,000 on average. Contributions increased in February 2023 to a maximum of Sh4,320 per month.
A 2024 survey by the Retirement Benefits Authority highlighted that high living costs and responsibilities for dependents leave many retirees struggling. Only 41 percent of retirees said their pensions were adequate.
“Despite many saving for 30 to 40 years, only 41 percent felt their pension benefits were sufficient. This suggests that savings rates are often too low, emphasising the need for encouraging higher contributions and additional voluntary contributions,” RBA said.
The survey also noted low uptake of voluntary pension contributions, with just 19 percent of workers participating. Most retirees experience a steep drop in income after retirement, reinforcing the need for better financial planning and more robust savings.
As Kenyans live longer and traditional family support systems evolve, more elderly citizens risk living in poverty without sufficient retirement funds.
