Choosing a Pension Plan

 

Whether you’re formally employed at a bank or large company, a factory worker, tenderpreneur, SME/ business owner, matatu guy, farmer etc. it really doesn’t matter what you do as long as you choose a pension plan, and start investing and saving as soon as possible.

If you want to retire with money you need to pick a financial partner. You are probably in some investment fund, but is it a pension fund? RBA registered pension plans usually have the words pension or retirement in the name. Also avoid insurance companies because they try and enhance these with other insurance benefits and it gets confusing, and takes away from the simple nature of retirement.

Collectively, at the beginning of the year, there were about 162,000 Kenyans who had placed about Kshs billion saved in individual plans. RBA had registered 43 retirement schemes for  individuals from providers such as Alexander Forbes,  Amana, Apollo, British American, CFC, CIC, Co-op Trust, Eagle Africa, GA Life, ICEA, Kenindia, CPF, Octagon, Old Mutual, Sanlam, UAP and  Zimele.

These are almost all standard and they give members annual statements and hold annual general meetings to brief members on how the funds are performing. Also:

  • Depending on your current income, you may want some flexibility in terms of a plan that allows irregular deposits, had affordable investments and allows payments by standing order or mobile money (m-pesa)
  • One important consideration is also the cost of the fund e.g. Zimele quotes 2.5% per year for the personal pension plan and 2% for their guaranteed pension plan. Check with any plan what the cost is, and avoid those who charge an upfront cost for joining (if any).
  • Many of the insurance ones give the option of a guaranteed return or a higher one that depends on the market. As of 2015 pension industry fund assets were invested in government bonds (30%), followed  by quoted securities (23%),  then property (19%).
  • Many allow employers to co-invest with their employees, effectively doubling their retirement savings every month.
  • There was a time when the minimum to join was about Kshs 5,000 but now the minimum for many (other than Mbao) is Kshs 200 or 500 per month. This makes them easy to join, but remember you will harvest what you invest, and this amount should be increased as s high as, and as soon as possible. There’s tax relief on pension savings of up to Kshs 20,000 per month in Kenya.

So which ones to pick? Here are 5 picks in no particular order:

mbao-application-is-simple

It’s simple to apply for a pension plan

  1. Blue MSMEs Jua Kali Individual Retirement Benefits Scheme (More on the Mbao Pension Plan under which one can save as little as Kshs 20/=). According to RBA, Mbao is has the largest membership of about 75,000 members; its big attraction is its informality.
  2. Jubilee Insurance Personal Pension Plan. This is th largest individual plan in terms of assets, and its 17,000 members have saved over Kshs 7 billion.
  3. Alexander Forbes (Vuna Personal Pension Plan) (I use this one)
  4. Octagon Personal Pension Scheme: No, minimum, savings, and gets 10% a year with an income draw down option.
  5. UAP Life Assurance Individual Retirement Benefits Plan. This pension can be combined with life assurance so that on premature death, combined benefits of accumulated savings and life assurance becomes payable.

This is part of an ongoing series on retirement, dubbed Kulegalega, with the Retirements Benefits Authority.  

$1 = Kshs 101

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