Social security investment secures your financial future, not an expense

Kenya’s retirees are among the poorest globally with a new report pointing to an ineffective pension system. FILE PHOTO | POOL  

By NORMAN MUDIBO More by this Author

The red lights are flashing on Kenya’s social security dashboard. Transient poverty is becoming an issue of concern to policymakers and families.

We are saving far less than we need in our old age. The statistics are stark and even State-provided social protection still falls short of targets.

We are only spending 0.4 percent to diminish the risks and vulnerability of poor households and cushion our future.

This scenario is further exacerbated by reports that fewer State pensions are being disbursed to retired civil servants due to a cash crunch.

Recently during the Kenya Social Protection Conference President William Ruto did not mince words as he challenged participants to come up with practical, workable strategies to ameliorate the situation.

At the conference, speakers were unanimous that social security was an investment and not a cost.

Statistics show that only 25 percent of the Kenyan workforce contributes to the National Social Security Fund while 24 percent to National Health Insurance Fund.

As people develop through their lifetime they have an expectation that a time will come when they will retire. It follows that they will experience a reduction in income.

For some people, the State pension or supplementing what they have with employer-sponsored retirement plans or even some other form of pension programme would make up for some of this loss of income in retirement.

A few may have an opportunity to accumulate wealth without using pension schemes. Some, through their business ventures, money markets, stocks, low-risk investments such as fixed deposits, tax-free bonds or other asset classes.

The Retirement Benefits Authority (RBA) says only 25 percent of employed persons have some form of pension plan.

It means that millions are wallowing in abject poverty in old age as they either have less monies or none at all to sustain them.

Little wonder that statistics by the Kenya National Bureau of Statistics show that retirees are getting back to the job market to avoid the misery in old age.

The RBA says 73 percent of retirees are not happy with their pension while only four percent of members have savings of Sh10 million.

When planning for retirement decide whether your savings are enough to live on in old age and if not, where additional income will come from.

Few people realise that providing the required level of income in retirement requires a substantial level of pension savings.

The International Labour Organisation says in some countries, there is dissatisfaction with the administration of social security, considered the foundation on which workers can build on to plan for their retirement.

It provides a basis for protection in the future.

One of the key global problems facing social security today is the fact that more than half of the world’s population (workers and their dependents) is excluded from any type of social security protection.

They are covered neither by a contribution-based social insurance scheme nor by tax-financed social benefits, while a significant additional proportion is covered for only a few contingencies, adds ILO.

It calls for reforms to involve a review of the role of the State, the responsibilities of the social partners and the desirability of greater participation of the private sector.

The achievement of universal social protection is closely aligned with the 2030 Agenda for Sustainable Development, in particular Sustainable Development Goal (SDG) 1 which is explicit, ‘’end poverty in all its forms everywhere.”

There is a growing global consensus that affirms social security as the surest way of meeting the SDGs referred to by the United Nations as the ‘’global blueprint for dignity, peace and prosperity for people and the planet.

Kenya spends Ksh28B on safety net programmes compared to countries like Belgium, Brazil, Mexico, France, and Germany which spend between 20 to 40 times on social protection programmes seen as a key strategy for tackling poverty and vulnerability.

They have a combination of insurance benefits and fall- back system of unemployment assistance for workers who have exhausted their insurance entitlements.