Benefits of Personal Pension schemes in Kenya

Personal Pension Schemes in Kenya (also referred to as retirement plans) are mainly offered by insurance companies to help individuals to build up a sum of money that can be used in retirement. The money is invested to generate a regular income, which is referred to as pension. Pension plans are different from life insurance policies which are taken to cover risk in case of an unfortunate event happens.

What are the Key Benefits of  Personal pension schemes in Kenya?

“A retirement benefits scheme can be seen as a form of insurance; you pay premiums while you are working to cater for the period when you will not be earning later in life. The Pension scheme protects members against the risk of poverty in old age by ensuring that they are able to provide for themselves in retirement.”

 You will enjoy Tax benefits
Saving in a registered personal pension schemes in Kenya is one sure way of keeping your savings safe from the tax man. Contributions to a retirement benefits scheme are tax exempt as per the set limits (Kshs. 20,000/- per month or 30% of salary, whichever is less). The return earned on the investment is also tax-exempt.

Retirement is guaranteed

No matter how active we are today, there will come a time when we will have to retire. However, our living expenses such as food, medical care, housing, and electricity do not retire. Saving in personal pension schemes in Kenya now helps us to save and create the income needed in retirement to cater to these expenses.

It helps you to save in a disciplined way
“Money put away in a retirement benefits scheme is not readily available for withdrawal unlike money in a bank account.”

You can expect to live longer

People are living longer due to advances in the medical field. You will need more money in retirement to cater for the expected long life.

WHAT ARE THE VARIOUS WAYS OF SAVING FOR RETIREMENT?
 
Government-Sponsored Plans

The National Social Security Fund provides basic financial security to Kenyans upon retirement. Contribution is compulsory for employers and employees. However, the benefits paid out are often not enough to provide for retirement.

Employer-Sponsored Plans

These Pension schemes are formed by employers for the benefit of their employees. It is not compulsory for employers to form pension schemes. Many employers in Kenya have not set up retirement schemes meaning that their employees have to plan for their own retirement savings.
 
Individual Pension Plans
Employed people who are not in an employer-sponsored scheme, as well as self-employed people, can join an Individual Pension Plan.

CAN MY EMPLOYER CONTRIBUTE TO MY PERSONAL PENSION PLAN?

Yes. Your employer can contribute a percentage of your monthly salary towards your personal plan based on the agreement between you and your employer. The employer is allowed to treat the contributions to the scheme as a tax allowable expense in their books of accounts.

Read also why It is Good to have a life insurance policy in Kenya

WHO CAN JOIN THE SCHEME?

Anyone over 18 years of age who is either employed or self-employed can join a personal pension benefits scheme. You can join such a scheme by filling a simple application form and making your first contribution.
Membership is open to:
• People working in organizations that do not have a retirement benefits scheme. People in seasonal or contractual employment.
• Self-employed people.
• People working in the Diaspora.
• Members of existing schemes who are changing jobs and would like to transfer their pension funds from the employer-sponsored scheme.

 Apply now for GA Insurance’s Personal Pension plan here now for free