The Retirement Benefits Authority (RBA) is counting on the informal sector to more than double pension savings to Sh2.4 trillion in the next five years, riding on mobile phone-based products.
Chief executive Nzomo Mutuku on Tuesday said roping in the sector will help grow pension coverage from the current 20 percent to at least 30 percent by 2024.
“Informal sector cannot use payroll system to remit savings, so we want to have mobile phone-based platforms where one can make contributions. And this has to be flexible so that when one gets income, they are able to contribute,” said Mr Mutuku.
He spoke in Nairobi during the launch of RBA 2019-2024 strategic plan premised on improving access, efficiency and stability of pension contributions in the country.
Mr Mutuku said more pension schemes will be required to roll out products similar to that of National Social Security Fund that allows M-Pesa contributions of at least Sh200.
“We want to make it easier for them to join schemes without having to fill forms or visit offices. We want to have platforms for choosing schemes, joining, making contributions and receiving benefits,” he said.
The market already has Mbao Pension Scheme started in 2009 as an individual pension plan majorly for the informal sector.
RBA targets at least 600,000 new pension contributors every year by reaching out to segmented groups and also diversifying investment portfolio.
Pension coverage has been growing from 16.8 percent in 2013 to the current 20 percent, but Treasury secretary Henry Rotich said this is not sufficient relative to the size of Kenya’s gross domestic product (GDP).
“We need to raise our savings ratio over 27 percent of GDP and that will require pension coverage to also rise significantly. Innovative schemes such as Mbao pension scheme will significantly increase access,” he said.
Assets of pension funds grew by 21.1 percent from Sh963.11 billion as at June 2017 to Sh1.17 billion as at June last year, nearly 14 percent of Kenya’s GDP.
RBA forecasts Sh5 billion income in the next five years, out of which Sh1.5 billion will be used to implement the strategic plan.
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