The Retirement Benefits Authority (RBA) was established through the Retirement benefits Act, 1997.
It was meant to help in the regulation, supervision and promotion of retirement benefits schemes and the clean-up of the retirement sector.
The RBA has a very wide mandate on pension. It has been a focal point for driving growth and discipline in the industry through regulatory and advisory interventions.
The institution has enforced the Act with admirable success and restored order in the collection, management and disbursement of pension funds to members.
It has also increased synergy, collaboration and harmony among stakeholders and considerably raised the quality-of-service delivery to pension schemes by registered service providers.
As a result of the successful interventions, the industry appears to be showing signs of stability even as it becomes the focal point in addressing the challenges facing Kenyan pensioners.
But the successes in this quarter appear not to be addressing the elephant in the house – the ultimate goal of increasing the amount of retirement income available to pensions schemes in Kenya.
The industry is still mired in an environment of suspicion and negative perception mainly by the main stakeholders – employees/pensioners.
Kenya, it has now emerged, lacks a vibrant public pension system and policy. This has made most employees rely on occupational plans for their retirement packages.
In fact, 94% of employers surveyed by Global Remuneration Survey in 2013 said they have established an occupational plan for their employees as the ultimate benefit that addresses their long-term financial needs.
However, the irony is that while the RBA, other stakeholders and employers strongly believe and commit to the development of the industry, the perception and commitment of the employees, cast long shadows of doubt.
A brief look at statistics in industry paints a grim picture of things. Some of the statistics gathered in previous studies are as follows:
- Low levels of contributions – employees contribute less than 10% of their income while 64.2% of employers contribute more than 10% (RBA 2012).
- Only 8% employees did Additional Voluntary Contribution (AVC) (RBA 2012)
- Some 64% of retirees receive a retirement income described as insufficient for their needs (RBA 2012)
- Average retirement benefits earned by retirees of a company in Kenya in 2014 is only sufficient to last them for 62 months. (Okwemba, 2015).
A casual look at employee perceptions on pensions reveals lack either of interest or outright resistance to the ideals of employee participation in pension.
Pension participation is the extent to which employees get involved in pension activities such as contribution levels, attendance/participation in meetings, evaluation of scheme performance, benchmarking, just to name a few.
Most employees still regard pensions as ‘an employers’ thing’ and their participation is limited to fulfilling the minimum conditions set out in the rules of the scheme.
With most employers opting for Defined Contribution schemes, low levels of participation by employees should be a key area of concern to all stakeholders because it will automatically lead to low level of benefits.
On the other hand, life expectancy is said to be on the rise -at 63.5years in 2015 up from 61 years in 2010 (CIA World Fact Book).
Coupled with the collapse of the previous socio-economic support structures at family level, retirees are more exposed and hence they need to lake personal responsibility for pension participation more seriously because they will receive inadequate income during retirement.
In conclusion, the RBA and the pension industry at large will not succeed in its ultimate objectives if the gaps created by pessimism in member participation are not addressed.
As we improve the institutions providing pensions services, we must look at the capacity building for members to enable them make informed decisions on the industry.
There is also need to create awareness for members and the public at large to enable them make informed choices about retirement planning and pension participation.
Low levels of awareness have largely resulted in negative perception or lack of appreciation for participation in pension schemes.
The way forward
The way forward is for RBA to take charge of member education in order to raise the levels of awareness and foster positive perceptions.
It is not an exaggeration that RBA enjoys a high level of acceptance among members of pension schemes due its contribution towards protecting members interests. It also has the legislative muscle.
This explains why it is better placed to lead this initiative.
This position is further reinforced by the fact that a similar initiative targeting the Trustees (TDPK) has succeeded in raising the standards of Trusteeship overseeing the management of pension funds.
To succeed in this objective, RBA should consider the following: –
- Establish a regulatory framework providing for compulsory member education of pension scheme members and prescribing levels of training, frequency, content etc.
- Liaise with other like-minded stakeholders on development of appropriate curriculum, identification and accreditation of trainers and setting of minimum standards.
- Ensure compliance through its established supervisory mechanisms
- Monitor the impact of training on pension contributors and provide additional support necessary.
Collaboration between RBA and ARBS in Member Education
The Association of Retirement Benefit Schemes (ARBS) brings together the sponsors of occupational schemes, members, service providers and other stakeholders with the objective of providing education, advice and lobbying on pension matters.
According to ARBS strategic plan, one of its objectives is to engage in activities that would promote the development and awareness of the retirement benefits sector.
The ARBS is therefore best placed to collaborate with RBA in the establishment of regulated member education for the following reasons: –
- It comprises of principal stakeholders of the industry who have invested heavily in the industry with the intention of securing a financial future for their employees.
- Unlike other stakeholders, ARBS does not have commercial interests in the industry so it is well placed to guide on the development of objective and balanced programs and curriculum for pension membership education.
- The ARBS membership has the will and resources for turning member education program into a success within a short period as well as coordinate evaluation of effectiveness.
- The membership is the only well-placed stakeholders who can offer a platform for learning, reflection, benchmarking, brainstorming and negotiation which can lead to change in members perception and commitment.
- They are also in a position to implement the wishes of the members which arise out of these positive deliberations.
In other words, ARBS would approach this initiative with the sole purpose of enhancing the chances of success for their occupational pension plans through involvement and participation of their employees.
Members’ education programs can be extended to the wider public to encourage them to participate in individual pension plans. ARBS can also seek to extend its collaboration to NSSF for the purpose of reaching out to the wider public.
In Conclusion, one would be tempted to suggest that Compulsory member education is the missing link in the workers’ financial security.
