RBA keen on pension regulatory body

The retirement authority is considering putting up a regulatory body that will oversee micro-pension activities in the country.

According to Retirement Benefits Authority (RBA) research and development manager Nzomo Mutuku, the sector is plagued with inconsistencies that have contributed to low pension savings from workers in the informal sector.

“The current schemes have questionable structures and governance resulting in diminished confidence by clients. A body is needed to regulate the activities in this sector and increase its uptake,” he said when he received research findings from United States International University (USIU) in Nairobi.

The findings, dubbed ‘Critical Success Factors for a Sustainable Micro-Pension Scheme’, have indicated that less than one per cent of workers in the informal employment are saving for retirement, compared to 15 per cent of those who have been employed formally.

Hurdles alienating the informal sector to contribute to pension scheme include low incomes, temporary nature of their employment and negative perception they have on financial institutions according to Amos Njuguna, the assistant professor at USIU’s Chandaria School of Business.

“The informal sector has the ability and willingness to save but they lack competence and saving avenues to transform these savings into substantial retirement income,” he said.

Mr Njuguna, who was also the principal investigator in the report, said the percentage penetration was alarming as the sector employs 80 per cent of the workers in the country.

The research, which was done from July last year to January, covered 1093 respondents, mainly members of the Kenya National Jua Kali Cooperative Sacco.

RBA rolled out Mbao Pension Scheme last year on July to target the low-income earners in the country. Workers would voluntarily remit a minimum daily contribution of Sh20 using mobile money services for the retirement savings plan.

The findings shows that the RBA Act does not fully accommodate micro-pensions in areas of corporate governance, its investment of the funds collected, the risk management, taxation benefits and the rules of withdrawal.

A regulatory body for the schemes would guard the funds from unscrupulous management and would increase confidence of pension savings in the sector.