Enhancing pension adoption by SMEs

A recent study by Wylde International, revealed that low income, low awareness of retirement savings and a general wrong perception to saving were the main reasons why Kenyans in the SME sector are not taking up retirement plans.

Wylde International a consultancy firm that helps entrepreneurs worldwide grow their business showed that 97 percent of businesses were aware of the various retirement savings options. However, the uptake of the available options by these businesses remains low especially of voluntary pension saving schemes.

According to the Retirement Benefits Authority (RBA), only 21 per cent of the working population allocates money towards pension schemes leaving at least 12 million people with no form of retirement or social security fund to rely on when they retire.

In Kenya, Small and Medium Enterprises (SMEs) employ up to 80 percent of Kenya’s population and make up for 90% of the existing businesses. As major contributors to the economy, SMEs play a significant role in supporting the livelihoods of millions of Kenyans.

Insurance companies in Kenya are a major provider of retirement benefits schemes. A good number of Life Insurance companies offer retirement benefits schemes, which include Employer Pension Plans, Umbrella Pension Plans and Individual Pension Plans. Umbrella pension plans are suitable for SMEs who have a need to enroll members to a retirement benefit schemes without having to set up a standalone scheme saving on costs for setting up such scheme.

RBA registers and monitors the management of schemes to protect members’ savings. Saving in a registered retirement benefits scheme ensures that your funds are secure, in that the investment choices made by companies running retirement schemes are regulated to avoid cases of malpractice that would jeopardize the safety of members’ hard-earned money.

Any SME can join an umbrella pension scheme by filling an application, which marks the beginning of the retirement planning. CIC Life has a team of experts whose role includes explaining how the umbrella pension product works. Their expertise includes guiding a potential client on the amount of savings to consider setting aside in line with a person’s retirement savings goal.

With the impact SMEs have in the society, education and sensitization on retirement savings can boost pension uptake in the country. Organizations such as CIC Insurance can work with various SMEs to ensure they are equipped with knowledge on pension products and their benefits.