Avoid lump-sum pension payments, State official advises retirees

Vision 2030 secretariat director general Mugo Kibati says increasing the number of retirees on monthly pension payment rather than lump-sum benefit pay could help to reduce old-age poverty. File 

By MOSES AKENA

Increasing the number of retirees on monthly pension payment rather than lump-sum benefit pay could help to reduce old-age poverty, a senior government official has said.

The director general of Vision 2030 secretariat, Mugo Kibati, said Wednesday lump-sum retirement benefit payments increase the risk of squandering the cash.

An alternative for workers who get lump-sum pay on retirement would be to invest their money in insurance firms, which pay a pre-determined monthly pension for an agreed period or until death.

“It is important to look at a strategy to inculcate basic and dignified existence in old age,” said Mr Kibati on Wednesday during launch of CIC’s Life Assurance Annuity Plan in Nairobi.

Kenya has an estimated 1.5 million people aged above the retirement age of 65.

Mr Mugo Kibati said whereas the government has lifted taxes on benefits of retirees, the payment is rendered meaningless if it is not paid and used in a sustainable manner.

CIC Assurance said the plan, that starts at Sh400,000, offers a regular monthly pay out.

The payment, optioned for single and joint entity, also offers Sh100,000 free for funeral expense for deceased members.

The Chief Executive, Nelson Kuria, while acknowledging the poor attitude towards retirement insurance in the country, said the package was demand driven.

“Keeping the retired population with a stable income throughout their lives reduces the levels of dependence and increases economic activity,” he said.

The government provides Sh2,000 monthly to poor Kenyans aged 65 and above who are not on pension. But some of them say the money is too little to cater for their needs.