If you want to access your retirement benefits in Kenya, here is all you need to know
Is it true that if I change my job I cannot access my benefits until age 55?
Following the changes introduced by the Minister for Finance during the 2005 Budget, if you are a member of a retirement benefits scheme then, if you leave the employer, you may be paid your own contributions to the scheme plus investment income in full.
If you have served for more than three years, then fifty (50%) of the employers contribution is retained in the scheme where it continues to earn income until the retirement age specified inthe rules of that particular scheme. In a defined contribution scheme, the amount retained is determined by an actuary.
You can, however, choose to transfer the retained benefits to the scheme of your new employer at any time and you will be paid the full benefits in case you are retiring on grounds of ill health. You may also transfer the retained benefits to an individual retirement benefits scheme.
Why should the Government take my money yet the employer was contributing on my behalf?
- The Government and the Retirement Benefits Authority do not have access to your money at any time.
- The retained benefits are held in the retirement benefits scheme that you are a member of just like when you were still working in the company.
- Retirement benefits schemes are run by Trustees, fifty percent (50%) of whom are nominated by you, the members, and fifty percent (50%) nominated by the employer. The Government does notappoint trustees or get involved in running schemes.
- The trustees are required to appoint an independent professional company known as the manager to invest the scheme funds and an independent bank known as the custodian to hold the assets.
- You will still remain a member of the scheme and will have rights to nominate or serve as a trustee, receive the summarized annual audited accounts, receive an annual benefits statement and attend the mandatory scheme Annual General Meeting.
- Nobody can access your funds and they remain safe and continue to grow even if your former employer goes out of business.
But now days many companies, including the Government itself, are retrenching workers. What happens to me if I am retrenched?
Retirement benefits should not be confused with terminal benefits. If you are retrenched you will still receive your terminal benefits, golden handshakes etc. which are paid by the employer and not by the retirement benefits scheme. A retrenched worker may also be entitled to retirement benefits as provided in the employer’s scheme rules.
As the name implies, retirement benefits are to cater for you when you reach retirement age and not when you are still economically active. Obviously consuming your benefits before retirement age defeats the whole purpose of saving for retirement.
Where has the new requirement on access been imported from?
The requirement is not new in Kenya. The Civil Service, the National Social Security Fund and a few private sector schemes, especially multinational companies, have all long not allowed members to access their benefits, including own contributions, before retirement age. The provision is common in many developed and developing countries around the world.
So where does the Retirement Benefits Authority fit into all this?
- The Authority is the regulatory body charged with protecting the retirement benefits of scheme members like you. The Authority overseas the industry to make sure that your rights are protected.
- The Authority does not hold members funds nor does it instruct schemes where to invest.
- However, if you have a problem receiving your benefits you can file a complaint with the Authority, which will take it up on your behalf.
- The Authority has powers to sanction and prosecute any trustee or other person who fails to follow the law with regard to your retirement benefits.