• The contributions have a 100% capital guarantee. The retirement benefit schemes managed by Insurance companies are guaranteed funds which means that the insurance company guarantees the capital put into the scheme plus a minimum rate of return.
• Contributions are flexible depending on your financial ability and your needs.
• Contributions are easy to make through deductions from your salary, Direct Debits, M-Pesa, etc.
• The fund earns compound interest. This allows small regular contributions to grow to significant retirement savings over time.
• It gives the member an opportunity to save and improve financial security in his/her retirement.
• It offers a pooling advantage. Funds from various members are pooled together to
form a huge fund that allows a larger scale of investments, resulting in higher returns.
• It consolidates pension management for individuals who are changing jobs. If you change jobs, you can transfer your benefits to a Personal Pension Plan.
• Allows one to create a fund of which 60% may be used as additional security for a mortgage.
• The accumulated fund plus investment income is paid to survivors upon the death of the
member, providing a financial cushion for them.
• Withdrawal terms are flexible.
• An employer can contribute on behalf of the employee as long as the combined contributions
do not exceed 30% of the employee’s salary. Any amount above this will not enjoy tax exemption benefits.
• Provides various flexible payments to a member at retirement i.e. lump sum, Pension/
Annuity and even the option to keep the savings invested and draw an income from it. pensions can therefore play an important role in breaking intergenerational poverty cycles and thus increase the life expectancy of the elderly generation (Help Age International 2006; Keizi, 2007).
Tax Benefits
• Contributions are tax deductible. The Income Tax Act allows for a maximum tax deductible
contribution of Ksh 20,000 per member per month (or 30% of your salary whichever is less)
• Income earned from investments is tax free and therefore generates more funds for
reinvestment.
• The first Ksh 600,000 of a lump sum payment is not subject to tax if the member has been a member for more than 10 years.
• On retirement before 65 years, the annual tax-free pension is Ksh 300,000. Pension and lump sum payments after the age of 65 are tax free.