Britam

Planning for retirement is no longer a luxury—it’s a necessity, particularly in Kenya. With rising living costs, evolving family support structures, and increasing life expectancy, securing your financial future requires proactive measures. While the National Social Security Fund (NSSF) provides a baseline, private pension plans offer enhanced returns, tax advantages, and greater flexibility. In this comprehensive guide, we’ll explore top pension providers in Kenya, their features, and how to select the best plan to safeguard your retirement.

Why Retirement Planning Matters in Kenya

Kenya faces demographic and economic shifts that underscore the urgency of retirement planning. Here are critical points to consider:

• Aging Population: Kenya’s population is aging, increasing the dependency ratio and straining social security systems.
• Inflation: At a current rate of 6.8%, inflation erodes the purchasing power of savings over time.
• NSSF Limitations: NSSF provides limited payouts. As per a report, the maximum payout can reach Ksh 1,080,000 but this lump sum often falls short of retirees’ long-term needs.
• Rising Healthcare Costs: Healthcare expenses tend to increase with age.
• Economic Uncertainties: Job security and economic stability can’t be guaranteed, making personal savings essential.

Private pension plans, regulated by the Retirement Benefits Authority (RBA), offer numerous advantages:

• Compound Interest Growth: Early savings benefit significantly from compounding. For instance, saving Ksh 10,000 per month with a 10% annual return could grow to approximately Ksh 38 million over 35 years.
• Tax Benefits: Contributions are tax-deductible up to Ksh 20,000 per month (Ksh 240,000 annually).
• Flexibility: Adjust contribution amounts, make lump-sum additions, and potentially access funds for emergencies.

Key Factors to Compare Pension Plans

1. Returns and Investment Options

Providers invest funds in various assets, including stocks, bonds, and real estate.

• Old Mutual: Known for diversified portfolios with historical returns surpassing 10%. They offer segregated and guaranteed options.
• APA Life: Guarantees a minimum 4% return, with bonus yields.

Investment strategies vary, impacting potential returns and risk levels.

2. Fees and Charges

Understand all associated fees. These include:

• Management Fees: Usually a percentage of the fund’s value.
• Administration Fees: Charged for managing accounts and providing statements.
• Withdrawal Penalties: Fees for accessing funds before retirement age.

3. Flexibility

Flexibility is crucial to accommodate life changes:

• Contribution Frequency: Providers typically offer monthly, quarterly, or lump-sum contributions.
• Early Access: Some plans allow partial withdrawals for specific needs. APA Life permits members to use up to 60% of their savings as mortgage collateral.
• Portability: Can you transfer your pension if you change jobs?

4. Regulation and Governance

All legitimate pension providers must be approved and regulated by the RBA. This ensures:

• Fund Security: Adherence to investment guidelines that protect members’ savings.
• Transparency: Regular reporting and disclosure of fees, performance, and governance.

Top Pension Plans in Kenya (2025): Provider Highlights

1. Old Mutual Individual Pension Plan

Old Mutual offers an Individual Pension Plan (IPP) designed for personal savings towards retirement.

Key Features:

• Flexibility: Adjust contributions based on your preferences.
• Tax Benefits: Contributions are tax-exempt up to set limits.
• No Penalties for Withdrawal: Access up to 60% for a mortgage loan.
• Consolidation: Consolidate pension benefits from various employers to maximize savings.

Benefits:

• Build a fund to achieve your dreams.
• Cover medical expenses.
• Invest NSSF Tier II contributions.
• High investment returns.
• Cost-efficient planning.
• Competent customer service.
• Prompt payment of claims.
• Free financial education.
• Access to a wide range of financial solutions.
• Flexible retirement plan options.

Fees: 1.25% annual fee of the funds under management.

Suitable for: Individuals aged 18 and above.

Tax-Deductible Contributions: Up to 30% of pensionable salary or a maximum of Kshs 20,000 per month.

2. Britam Retirement Plan

Britam offers flexible retirement plans designed to ensure a consistent source of income while maintaining your lifestyle.

Types of Plans:

• Pension Plan: One-third of the accumulated benefit is paid as a lump sum, with the remaining two-thirds paid as regular income for life.
• Provident Plan: The entire accumulated amount is paid as a single lump sum upon retirement.

Benefits:

• Exponential savings growth with interest.
• Retirement benefits paid according to the option selected.

3. APA Life Individual Pension Plan

APA Life’s Individual Pension Plan (IPP) is a long-term investment plan that helps build a sizeable retirement fund with competitive interest rates.

Why APA IPP?

• Guaranteed Returns: Member’s contributions and earnings are guaranteed against investment loss at a minimum of 4%.
• Bonus Returns: Offers bonus returns in addition to guaranteed interest.
• Risk-Free: Investments risk borne by APA.
• Flexibility: Flexible contributions and withdrawals.
• Mortgage Collateral: Use up to 60% of the fund as collateral for a mortgage.
• No Hidden Costs: Offers no costs of joining or administering the fund.
• Power of Compounding: APA has averaged 10% net investment returns over the last 10 years.

Example:

Reporting: Members receive annual benefit statements.

Governance: Managed by a professional independent corporate board of trustees.

4. Madison Personal Pension Plan

Madison Insurance offers a Personal Pension Plan designed to provide retirement, savings, and investment benefits to individuals.

Key Features:

• Specially designed savings plan for retirement.
• Maximizes returns.
• Ideal for individuals and occupational schemes.

Declared Interest Rates:

• 2021: 11%
• 2020: 8%
• 2019: 10%
• 2018: 10%
• 2017: 10%

Premium Payment Modes:

• M-Pesa
• Cheque
• Bank Transfers
• Check-offs for regular contributions

Benefits:

• Ensures a decent standard of living in retirement.
• Contributions up to Kshs. 20,000.00 are tax deductible.
• Members can assign up to 60% of their benefits as security for mortgages.
• Upon death, accumulated funds are paid to beneficiaries immediately.
• Operates under the RBA act.
• Single lump sum contributions allowed.
• Option to buy annuity at retirement.
• Additional cover on life, critical illness, and last expense.

Enrollment:

• Fill a proposal form.
• Provide copies of ID and PIN.
• Pay initial contribution or provide transfer request letter.

5. GA Insurance Personal Pension Plan

GA Insurance’s Personal Pension Plan is a long-term investment designed to help you build a retirement fund.

Who Forms The Scheme? GA Life Assurance Limited established the scheme.

Who Can Join? Employed individuals, self-employed individuals, and SMEs/groups.

How to Join? By completing an application form.

Contributions: You contribute a fixed amount from your salary, and employers can also contribute.

Tax Benefits:

• Monthly contributions are not subjected to PAYE (up to Kshs. 20,000 per month).
• Employers can treat contributions as a tax-allowable expense.

Income from Contributions: Contributions are invested and earn income from the day they are received.

Guaranteed Returns: 100% capital guarantee, with a minimum guaranteed return of 4%.

Fund Value Statements: Members receive monthly statements showing their fund status.

Leaving Job/Moving Jobs:

• 100% of your contributions plus accrued interest is paid to you (less taxes).
• Employer’s contributions are locked until age 50 and can be left in the scheme, moved to a new employer’s scheme, or moved to an individual retirement plan.

Death Benefits: 100% of your contributions and employer’s contributions plus accrued interest is paid to the nominated beneficiary immediately (less taxes).

Incapacity Benefits: 100% of contributions and accrued interest is paid to you.

Early Retirement: You can retire at age 50 and take 1/3rd of the fund as cash, with the remaining 2/3rd converted into a monthly pension.

Comparison of the Best Pension Plans

How to Start a Pension Plan in Kenya

1. Assess Your Retirement Goals: Estimate your future living expenses, desired lifestyle, and potential healthcare costs. Aim to save 10-30% of your current income.
2. Compare Providers: Utilize the comparison table above and conduct thorough research on each provider.
3. Enroll: Complete the application form. You’ll typically need your ID, PIN, and initial contribution.
4. Set Up Payments: Automate contributions via M-Pesa, bank transfers, or salary deductions.
5. Review Performance Annually: Stay informed about your fund’s performance and make adjustments as needed.

Tax Benefits of Pension Plans

Pension plans in Kenya offer significant tax advantages:

• Contributions: Tax-deductible up to Ksh 20,000 per month (Ksh 240,000 annually), reducing your taxable income.
• Investment Growth: Investment returns within the fund are tax-free.
• Withdrawals: Taxed as follows:
  • Lump-sum withdrawals: Subject to taxation based on prevailing tax laws.
  • Annuities (regular monthly payments): May be structured to minimize tax liability.

Common Mistakes to Avoid

• Delaying Enrollment: Starting early is critical. The power of compounding means that the earlier you begin, the more your retirement savings will grow.
• Ignoring Fees: High fees can erode your returns over time. Always factor in management, administration, and transaction fees.