Saving for Retirement through a registered Individual Pension Plan

Saving for retirement is a critical step towards financial security in Kenya. If you don’t have an employer-sponsored pension plan or are self-employed, a personal retirement savings plan is an excellent option. These schemes provide a structured way to save for your future, with several benefits that make them an attractive choice.

Key Benefits of a Personal Retirement Savings Plan

Tax Advantages: Contributions to a registered pension scheme are tax-deductible. The Tax Amendment Act, 2024, increased the maximum tax-exempt contribution to KES 30,000 per month or KES 360,000 per year. This means you can save a significant amount of your income before it’s subject to tax. Additionally, the investment returns earned on your contributions are also tax-exempt.
Flexibility: You have complete control over your savings. Most plans allow you to choose how much and how often you contribute, whether monthly, quarterly, or annually. This flexibility lets you adjust your savings according to your financial situation.
Security and Regulation: Personal pension plans in Kenya are regulated by the Retirement Benefits Authority (RBA). Your money is held in a separate trust, ensuring it’s secure and professionally managed according to strict guidelines.
Portability: Your retirement savings are tied to you, not your employer. If you change jobs, your fund remains with you, and you can continue to contribute to it. You can even consolidate pension benefits from previous employers into a single fund.

How to Join a Personal Retirement Savings Plan

Choose a Provider: You can join a personal retirement savings plan through various financial institutions, including insurance companies and asset management firms. To ensure the provider is legitimate, they must be registered with the RBA. For the latest list of registered schemes, visit the RBA website at www.rba.go.ke.
Gather Required Documents: Once you’ve chosen a provider, the application process is straightforward. You will typically need a completed application form from the provider, a copy of your National ID or Passport, and a copy of your Kenya Revenue Authority (KRA) PIN certificate.
Start Contributing: After submitting your documents and making your initial contribution, the provider will set up a personalized account for you. Contributions can be made via a standing order, mobile money (like M-Pesa), or a direct bank transfer. Many schemes have a low minimum contribution amount, making it accessible and flexible for many.

By taking these simple steps, you can start building a disciplined savings habit that will ensure a comfortable and secure retirement.

What you need to know about saving for retirement

When is the right time to start saving towards my pension?

The best time to start saving for your pension is now—the earlier, the better. Starting in your 20s maximizes compound growth, meaning even small contributions grow significantly over time. But if you’re older, begin as soon as you can—delaying further reduces your savings’ potential.

Why should I save through a pension scheme?

To have financial security at Retirement.
The funds you save will be a contingency fund in case of sudden illness or incapacitation that may lead to your retirement.
Offers financial protection to your dependents in case of death
Your benefits can be used to secure a mortgage.
It is a safety net upon loss of employment
The benefits you save cannot be attached and cannot be used to offset loans.
In bankruptcy, the benefits do not form part of your assets.
Upon death, your benefits do not form part of the estate for purposes of administration.
You will benefit from tax advantages.

What are some of the tax benefits of saving through a registered pension plan?

Members of Retirement Benefits Schemes registered with RBA enjoy tax-free contributions of up to Kshs. 30,000 per month. (Kshs. 360,000 p.a.).
Where one transfers gratuity to a registered Scheme, the tax-exempt amount is Kshs. 360,000 per year (i.e., Kshs. 30,000/= per month).
Investment income of the scheme is exempt from corporation tax.
Contributions to post-retirement medical funds are tax-exempt up to KES 15,000 per month.
Tax-free benefits for a member who leaves service and has: –
Attained the retirement age of the Scheme (whether Early, Normal or Late).
Withdraws their benefits due to ill health.
Has been a member of a scheme for 20 years or above.

Can I save for retirement if I am not formally employed? How do I start saving towards my pension?

Yes, you can save for retirement even without formal employment. Consider joining an individual pension plan (IPP) registered by RBA; and start making contributions. The key is to start small but stay consistent—even modest, regular contributions compound over time. The sooner you begin, the more secure your future will be.

Important to note:You can access the list of registered IPPs by visiting our website (www.rba.go.ke).The individual pension plan you join will guide you on how to join and how to exit if you need to.

How much of my salary should I save towards my pension?

A good rule of thumb is to save at least 10–15% of your income for retirement. However, the ideal amount depends on your age (the older you are, the more you should save), your retirement goals (when you want to retire & the lifestyle you want at retirement), and your current savings. Experts have recommended that you aim to replace at least 70-80% of your monthly income.

When can I withdraw my pension?

The law has provided instances when you can access your benefits, like when exiting a pension scheme, on medical grounds, or when you emigrate to another country. However, you are advised to try not to tamper with it as long as you can generate an income, as you might shortchange yourself in the benefits you eventually receive.

The law permits early access to retirement benefits under certain conditions, such as withdrawal from a pension scheme, certified medical incapacity, or permanent relocation abroad. However, it is strongly advised to avoid early withdrawals unless absolutely necessary, as doing so may substantially diminish your long-term financial benefits.”

What happens if I switch jobs? Does that affect my pension?

No, it does not. The funds that you leave in the scheme will be invested, and you can access them when you attain retirement age. You may also choose to transfer your benefits to another registered scheme (an IPP or to the new employer’s scheme) before attaining retirement age.

Can I withdraw from my pension Scheme if I leave employment before retirement?

Yes, you can, subject to certain conditions.

If you leave employment of the employer, for any reason, before attaining early retirement age of the scheme, you can be paid up to 50% of the total benefits (this includes employer contributions). The balance can be transferred or deferred as described in (13) above.
If you leave employment of the employer before attaining the normal retirement age of the scheme, you will be paid in accordance with the Trust Deed and Rules of the Scheme.
If you leave on medical grounds (Permanent disability or critical illness) at any age, you will be paid 100% of the benefits.
If you emigrate permanently, at any age (subject to approval of trustees) you will be paid 100% of the benefits.

What happens when I stop contributing?

Your existing savings remain secure and continue earning returns (positive or negative) as declared annually, though the growth of your benefits slows without new deposits. However, where the scheme is an Occupational or Umbrella Scheme, the member cannot stop at will, because the contributions are governed by the Trust Deed and Rules of the Scheme.

What if I die before retirement?

Upon death, your nominated beneficiaries and/or dependents will be paid your benefits in full. Please ensure you update your beneficiaries’ details when a major change occurs in your life (i.e., Marriage, death of a spouse or a child, additional children, etc).

Who can I nominate as a beneficiary?

You can nominate any person(s) who are depending on you financially or anyone you wish to benefit from your savings. It can be your immediate family, like spouse, children (whether minors or adults, and includes biological, stepchildren, adopted, or even those born out of wedlock), parents, or other dependents like siblings, grandparents, or any other persons who are reliant on you.

Important to note: Remember to apportion the benefits to each nominated beneficiary as a percentage, with the total summing to 100%.

What is an annuity?

It is a pension purchased from an insurance company of your choice. The insurance company guarantees that it will pay you for the rest of your life. Depending on the type of annuity you choose, the pension payment can be extended to your spouse.

Can my benefits be delayed or withheld for any reason?

Save for such unique circumstances, your benefits should not be withheld, since the law protects pension benefits from attachment (e.g., recovery after loan default) or assignment (e.g., offsetting loans), among others. However, your benefits may be delayed or withheld under certain unique circumstances, which may include incomplete documentation, Court Orders, or where contributions were made fraudulently.

What are some of my rights and/ or responsibilities as a pension scheme member?

You are entitled to payment within 30 days from the date of filing a completely filed claim. Transfer from one pension scheme to another within 60 days after notice.
You are allowed to access and interrogate the scheme documentation.
Right to attend AGMs to know how your scheme is performing.
Right to annual benefit statements from your scheme.
Right and responsibility to nominate beneficiaries.
Right to elect Trustees of the Scheme and to approve their remuneration.
Right to inform the RBA of any anomalies in the scheme
Right to immediate vesting of benefits.

Who can file a complaint?

Any person who is aggrieved by the actions and/or omissions of the Trustees, the service providers or even the services offered by the Authority can file a complaint with RBA.

Steps to file a Complaint with RBA

Prepare your complaint: Ensure you have a clear understanding of the issue you are facing.

Gather all relevant documents and correspondence related to your complaint, such as the benefits statement, any written decisions from trustees or service providers, and any evidence of communication.

A person(s) can lodge a complaint in his or her name or on behalf of another person as a group, organization, or institution. Complaints can be lodged through the following modes:

Filling a complaint form

In-Person visit: If you would rather lodge a complaint in person, you can visit RBA offices located on Upper Hill, Rahimtulla Towers, 5^th Floor. A team will guide you through the process.

Online Complaints Portal: Visit RBA’s complaints portal on RBA website: https://complaints.rba.go.ke/, where you can easily file your complaint.

Email: You can send your complaint to [email protected]. Make sure to include your details, scheme information, and a detailed description of the issue.

Telephone:

Text messages.

Social media.

Receipt and acknowledgement of complaints: Upon receipt of a complaint, RBA shall acknowledge receipt.

What happens after you file a Complaint?

RBA will review your complaint in detail, using the information you have provided along with their supervisory oversight of the scheme. The steps involved include:

Initial Investigation: RBA will contact your scheme and gather information. They will analyze the complaint based on the Retirement Benefits Act and scheme regulations and initiate appropriate action. You may receive requests for further information, so it is important to be responsive.

Decision: After investigations and receiving a response from the Scheme, RBA will issue a written decision. This could result in corrective actions by the scheme or clarification of misunderstandings.

Note: RBA aims to resolve complaints promptly, but more complex cases may take longer.

What can I do if dissatisfied with RBA’s Decision?

The law provides that any person dissatisfied with the decision of the CEO, or the Authority has a right to appeal to the Retirement Benefits Appeals Tribunal within thirty (30) days of receipt of the decision.

What if I want to complain or report anonymously?

If you want to report anonymously, you can do so via RBA’s Whistleblower Portal. This is ideal for reporting corruption or any irregularities within the management of your scheme. Use the secure whistleblower Portal on RBA website: https://portal.rba.go.ke/whistleblower.

RBA’s Role in Supporting Members

Beyond handling complaints, RBA plays a proactive role in ensuring that retirement schemes serve members effectively. Here’s how RBA continues to support scheme members:

Supervision of Schemes: RBA oversees the management of retirement schemes by ensuring that trustees and service providers follow the law. They also calculate a risk score for each scheme based on governance, financial stability, and member satisfaction. If a scheme is deemed high-risk, RBA intervenes.

Retirement Planning Seminars: RBA frequently organizes training sessions to help members prepare for retirement. These seminars are free and open to all scheme members. You can check the schedule for these sessions on RBA’s website.

Annual General Meetings (AGMs): RBA attends scheme AGMs and member education days to answer questions from members and ensure transparency. RBA participates in scheme AGMs to promote transparency, provide regulatory oversight, educate members, address concerns, and reinforce good governance within the retirement benefits sector

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