A recent survey by SanlamAllianz has revealed that many Kenyans are withdrawing their retirement savings when leaving a job, with 53% of respondents admitting to withdrawing some or all of their savings. The survey, which polled 300 Kenyans at different stages of life, found that only 32% of respondents kept or transferred their full retirement savings. This trend is concerning, as it can have a significant impact on an individual's quality of life in retirement.
The survey also found that 65% of respondents who withdrew their savings understood the effect on their retirement, but many later regretted their decision. According to the report, people are withdrawing their savings because they are faced with pressing financial needs, such as rent, school fees, or business expenses. However, this decision can have long-term consequences, as it can reduce the amount of money available for retirement.
The report highlights the importance of planning for retirement, with 69% of respondents saving or investing every month outside of compulsory pension deductions. However, many respondents cited household and family costs, as well as low or irregular income, as barriers to saving. The report notes that time is a critical factor in retirement planning, as pension money grows through compounding over decades.
The report provides three key lessons for ordinary investors. Firstly, it emphasizes the importance of time in retirement planning, as early withdrawals can set back the growth of pension savings. Secondly, it advises investors to look past headline returns and consider the real gain in purchasing power after fees and inflation. Finally, it recommends that investors think in terms of monthly income, rather than lump sums, to ensure a steady income stream in retirement.
The report also highlights the need for careful planning for healthcare costs in retirement. According to the survey, 53% of respondents had either not thought about medical costs after retirement or had no plan in place. This is concerning, as medical bills often rise in retirement, and a lack of planning can leave individuals vulnerable to financial shocks.
The changing nature of work in Kenya also presents challenges for retirement planning. According to the Kenya National Bureau of Statistics, the informal sector accounted for 87.2% of new jobs created in 2025. This shift towards informal employment may require pension providers to adapt their products and services to meet the needs of workers in this sector.
In response to these challenges, pension providers are urged to work with trustees and regulators to make staying invested the easy choice. This may involve offering advice at critical moments, such as when an individual is leaving a job, and designing products that allow for small, flexible contributions. By taking a more flexible and supportive approach, pension providers can help Kenyans achieve a more secure retirement.
Key points
- Many Kenyans are withdrawing their retirement savings when leaving a job, which can have long-term consequences for their quality of life in retirement.
- The report emphasizes the importance of planning for retirement, including careful consideration of healthcare costs and monthly income needs.
- Pension providers are urged to adapt their products and services to meet the changing needs of workers in Kenya, including those in the informal sector.
