Pension Claims Fell to Kes 23.65 Billion in 2019 Despite Increase in Savings
The annual report of the Association of Kenya Insurers (AKI) shows that pension claims fell to kes 23.65 billion in 2019 from kes 24.51 billion the previous year. This is despite the increase in savings for retirement by members of the association.
Tom Gichuhi the Chief executive has attributed the drop to the amendment that was made to the Retirement Benefits (Occupational Retirement Benefits Schemes) Regulations in the financial year 2018/19. He further on added that the regulations affected the access of benefits hence the decline in 2019. Now, the law allows access to 100% of one’s contributions, but 50% or 25 % must be deferred until 50 years of age.
Previously, Under the law that was passed in June 2019, employees were only allowed 100 % of their contributions while the total employers’ contributions remained locked until they attained the retirement age of 50 years.
This move was intended discourage the use of the pension funds upon the termination of their employment either by resignation or layoffs. It also sought to ensure the employees had enough savings to serve them in their old age and reduce dependency rate.
The report adds that the pension benefits represented 44.33% of kes 53.35 billion total claims and benefits in the year that saw growth from kes 45.89 billion in 2018. Over the period, AKI reported average net interest rate for deposit administration contributions at 9.94%
According to AKI, the entire life insurance business, increased by 12.14 % last year as gross premium underwritten for were registered at kes 97.85 billion up from kes 87.26 billion in 2018. Out of this, group life premiums, which are organized by employers, increased by 8.16 % to kes 25.11 billion from kes 23.17 billion in 2018.
Ordinary life business including investment and whole life policies grew by 22.97 % to kes 32.72 billion while contributions for investments or unit-linked contracts declined by 26.41% to kes 3.11 billion.
Despite the growth in contributions, it is important to note that the retirement benefits industry has fallen short in providing enough benefits and sustaining their members especially for companies holding segregated funds.