RBA

Resource Center Portal

Economic Role of RBA

It has been said that some of the proposals mooted by the Retirement Benefits Authority (RBA) will chase major pension schemes offshore. Comment.

Some of these fears arose from rumours and speculations with regard to the Retirement Benefits Regulations (the Regulations) which were first gazetted on 8th October 2000 and several have been gazetted since then.These fears turned out to be unfounded.

Before the Regulations were gazetted, there was an adequate exposure period for all stakeholders to make their representations and to present their opinions on the draft rules.

The RBAhas not heard of any scheme going offshore. Further, no inquiries been received on this matter. Once the role of the RBA was explained to all stakeholders, all fears will were calmed.
The Regulations allow for offshore investments up to a set limit. However, prudent trustees are aware that any scheme which invests offshore when it has Kenya Shilling liabilities to its members that fall due within a short timewill be exposing itself to exchange rate risks.

Why does theRBA force schemes to sell their property holdings yet the property market may be depressed?

The Regulations allow for a maximum of 30 % of the scheme fund to be invested in property.

This is in line with the principle of diversification of investments to reduce risk and safeguard members’ benefits.Schemes that have holdings in propertiesabove this maximum do not have to sell their properties but can submit a proposed action plan to the Authority showing how they will come into compliance within a specified time through, for example, diverting new contributions and income to alternative investments.

To what extent are pension schemes able to mobilise domestic saving in Kenya? Are Schemes allowed to invest offshore?
The sector is estimated to hold assets of an amount exceeding Shs.180 billion or 23 percent of GDP.

Proper management and investment of these funds can be, and have been, a vital catalyst to enhanced economic growth in this country as well as to the deepening of the capital markets and the development of longer term capital market instruments.

There is still scope for further development of the sector as only an estimated 15percent of the labour force is covered by the formal retirement benefits sector.

Investing a part of a scheme fund offshore may be a viable option especially if the scheme has foreign exchange denominated liabilities.

Schemes can currently invest up to 15% of their assets offshore.

What proposals are there to encourage private pensions? How about individuals organising for their own pension schemes outside the formal employment?
This is one of the priority areas for the Authority in order to cater for the 85% of the labour force that is not currently covered by retirement benefits.

The Authority has worked closely with service providers todevelop individual pension plans and appropriate provisions to this effect have been included in the Regulations including provisions for pooling in order to ameliorate the costs of such plans.

The Authority continues toconsult with the Government to seek attractive tax incentives for individual retirement benefitsplans.

What are RBA’s immediate priorities ?

  • Educating the public on the need to save for retirement.
  • Reaching the informal sector with advice and information on how to save for retirement
  • Registration and supervision of schemes and service providers so as to protect members’ benefits.
  • Educating trustees and service providers on their role and responsibilities.
  • Seeking greater tax and other incentives for schemes.
  • Development of individual retirement benefits schemes.
  • Diversification of investment options for schemes to ensure funds are well invested to meet members’

    needs.

Complaints and what RBA can do

Who can take a complaint to the Retirement Benefits Authority (RBA) for a decision?

1. Members or ex-members of occupational or personal retirement benefits schemes.
2. Spouses or dependants of members or ex-members who have died.
3. Anyone claiming to be a member or ex-member, or the spouse or dependant of one, as long as their complaint is about that claim.
4. People entitled to pension credits following divorce of a scheme member.
5. Personal representatives appointed on the death of people in categories 1 to 4.
6. A suitable person representing the interests of a minor or a person unable to act for themselves in one of categories 1 to 4.
7. Trustees or managers of occupational retirement benefits schemes.
8. Employers in relation to occupational retirement benefitsschemes.

Who can the complaint be against?
Members and ex-members, or anyone else in categories 1 to 6 above, can complain against:
· All or any of the trustees of the scheme, including past trustees
· The manager of the scheme: or the body that runs the scheme or, for insured schemes, in limited circumstances, the insurance company
· An employer (but only about the employer’s role in relation to the scheme, not general employment matters)
· An administrator of a scheme, which means any person or body concerned with the scheme’s administration (any other disputes with administrators are excluded)

Trustees can complain against:
· the trustees or managers of another scheme
· an employer in relation to the scheme

In addition,
· If a majority of them agree, trustees can bring a dispute with other trustees of the same scheme,
· A statutory independent trustee can bring a complaint against or a dispute with other trustees of the same scheme.
· If the trustee is a sole trustee it can refer a question to the RBA concerning its functions

Employers can complain
· In relation to a scheme,against the trustees or managers of the scheme.

What kinds of retirement benefits schemes can the RBA deal with?
Complaints may concern most kinds of retirement benefits schemes other than the Government scheme, which is not regulated by the RBA.

For the purposes of the RBAlegislation they are divided into two kinds:

· occupational retirement benefits schemes which means schemes established by an employer, whether in the public (other than Government) or private sector, and tied to employment with the employer or a connected group of employers
· Personal (individual) retirement benefits schemes being schemes not tied to employment with any particular employer.

Complaints may be lodged by
· Scheme members and ex-members (and their spouses and dependants), in relation to either kind of scheme.
· Trustees and employers, in relation to their own occupational retirement benefits schemes.
· Trustees of an individual retirement benefits scheme about their scheme.

What is excluded?
The RBA cannot:
· Deal with complaints about the way financial services business (outside fund management and custody) is carried out by organisations and people regulated by the Central Bank of Kenya, Commissioner of Insurance, Capital Markets Authority or bodies approved by them. Generally this means that the RBA will not deal with the way in which financial products are structured, sold and marketed.
· Deal with complaints about Government pensions or other Government benefits. Such complaintsshould be taken up with the office of the Director of Pensions.
· Investigate a complaint or dispute: –
o already subject to court proceedings
o dealing with matters outside retirement benefits (an employment tribunal counts as a court)
o the proceedings of which began before8th October 2000, unless they have been discontinued without a settlement binding on the person referring the matter to the RBA.
· Usually investigate matters which are subject to regulation by the Industrial Court. There are certain matters regulated by the Employment Act which may form part of terminal benefits (but are not retirement benefits) that the RBA cannot make findings about.
· usually investigate any complaint that has been, or is being, investigated by the Retirement Benefits Appeals Tribunal or any other Tribunal or body that was in existence prior to the enactment of the Retirement Benefits Act.

What does the RBA Act say?
Section 46 (1) of the Retirement Benefits Act Cap 197states that any member of a scheme who is dissatisfied with a decision of the manager or trustees of the scheme may request, in writing, that such decision be reviewed by the Chief Executive Officer with a view to ensuring that such decision is made in accordance with the provisions of the relevant scheme rules or the Act under which the scheme is established.

It is a requirementthat every retirement benefit scheme hasa built-in dispute resolution mechanism that should be the first resort for an aggrieved party. The party dissatisfied by the outcome can subsequently lodge a complaint with the RBA.

What is the procedure to follow as you go about lodging your complaint with the RBA?
· The complaint or dispute should always first be taken up in writing with the trustees, persons orinstitutions thought to be at fault. All occupational retirement benefit schemes are required by law to have a formal internal dispute resolution procedure. Where the requirement applies, if the trustees or managers have not been given the opportunity to issue their decision then the RBA cannot deal with the matter and will refer it back to the trustees, persons or institutionsthe complaint is against.

· Members, ex-members, spouses and dependants wanting to complain against the trustees or managers of the scheme should write to them asking for the procedure to be used. The formal internal dispute resolution requirement may not apply to complaints against employers or administrators, but attempts should still be made to resolve the problem by writing to them.

· The RBA expects individuals who want to complain to first seek dialogue with their scheme sponsor and/ or trustees. In many instances the dispute may arise due to lack of communication between the parties or misinterpretation of clauses in the scheme trust deed and rules. There is also the option of obtaining advice from lawyers, accountants and pensions advisors who can try to resolve the problem, corresponding with the scheme authorities as necessary.

The RBAcan also help with the internal dispute resolution procedures if you are not sure what to do, and we will explain if we think that the matter can be dealt with quickly and efficiently without recourse to the RBAcomplaints resolution process. If the RBAthinks that a complaint should be referred to the scheme’s internal dispute resolution mechanism, we will refer to the scheme’s trust deed and rules and advise you on how to go about it.

What are the time limits?
As a general rule complaints and disputes should usually be made in writing to the RBA preferably within 3 years of the act or omission complained about or disputed. If you did not know about the matter at the time, the 3 years will run from the time that you knew or ought to have known.

The RBA may extend the time limit if the complaint is made outside the 3-year period, but only as long as they decide that any further delay beyond 3 years is reasonable. In particular time spent using an internal dispute resolution procedure will usually be treated as a good reason for having delayed complaining. However, you should bring your complaint to the RBAas soon as you can. You do not have to assemble all the evidence first, as the RBA can undertake an investigation and call for the evidence as part of it.

How does one complain?
First check, using the preceding sections of this leafletthat you are a person entitled to complain, that your complaint is against the right person(s) or organisation(s), and that the RBA will be able to deal with the complaint.

There is a form which you should use to make your complaint. It can be obtained from the RBAoffice or website. (This does not apply to trustees, managers or employers wishing to complain who should write their complaint in full to the RBA with attached documents s necessary).Complaints will not be accepted on the telephone or by e-mail.

When sending the form, you should supply all relevant information in your possession, including copies of letters and so on. Wherever possible, keep copies for yourself.

You do not need to send the RBA your correspondence with for example your lawyers or other professional advisors providing you give written authority for them to release to the RBA everything that you have sent to them. The form contains a space for you to give this authority. You should also let the RBA have copies of all letters relating to the scheme’s internal dispute resolution procedure.

You may get someone else to write for you (for example a lawyer, accountant or trade union representative, or a friend or family member) so long as they have your written authority to represent you. A copy of your authority should be sent to theRBA. You will have to meet the costs yourself if you employ a professional person. The RBA can award you your costs if your complaint succeeds, but rarely does so because the procedures are designed to make paid representation usually unnecessary.

What will happen next?
The RBA will acknowledge your letter and, where applicable, ask for further information relating to your case. When the RBAstaff have all the relevant papers, they will write to you to say whether your complaint can be investigated. If it cannot, they will tell you why. The procedure for investigating and deciding complaints is partly set down in statute, and partly can be as the RBAdecides. The following description fits most cases, but there may be variations.

Who decides the complaint?
The RBA Chief Executive will decide the complaint. In a small number of cases, on looking at the complaint, the RBA Chief Executive may conclude that it cannot be upheld by the RBA. If so he will write to you explaining why. If you do not accept the explanation you can lodge an appeal with the Retirement Benefits Appeals Tribunal challenging the decision of the RBA. This appeal must be made within thirty (30) days of receiving the decision of the RBA.

If there is a possibility that your complaint can be upheld then a full investigation will begin. This applies to most complaints. The complaint form and all the papers that you have provided will be sent to the people and/or bodies that you have named as respondents for them to respond in writing. The RBA may ask for specific documents. Details of the complaint may also be sent to anyone else who has an interest in its outcome.

Any responses will be sent to you for your comments. The respondents also all have an opportunity to comment on each other’s responses. Afterwards, as considered necessary, the RBAChief Executive Officer may ask further questions and obtain further documents.

When adequate information is available, the RBA may arrange for the issue of preliminary conclusions to you and the respondents, including any directions thought at that stage necessary to put the matter right.

Directions can, but do not always, include payment of money. The preliminary conclusions do not have any legal force and are only issued to give all the parties an opportunity to see the way that the RBA is presently inclined to decide the matter. The RBA will take into account any comments made on the preliminary conclusions before issuing the final version which may be different.

The Directions are final and binding on all of the parties, including you – subject only to an appeal to the Retirement Benefits Appeals Tribunal and on a point of law to the High Court of Kenya and the Court of Appeal. The parties to an appeal may include you as well as the RBA. If there is no appeal, should the RBAdirections not be carried out, the decision can be enforced in the courts.

Retirement Benefits Regulations

1. What Regulations does the Retirement Benefits Authority (RBA) have in place?

The Retirement Benefits Act Cap 197 (the Act) in Section 32(3) empowers the Minister for Finance in consultation with the Authority to make and gazette regulations for the operations of the Retirement Benefits Sector.

These regulations provide the modalities for the implementation of the Act but cannot contradict the provisions of the main Act.

The Authority developed and gazetted the first Regulations in October 2000 in consultation with stakeholders to enable them to make their representations. Only after the views of stakeholders had been considered and incorporated in the draft did the Authority forward them to the Minister for Finance to be gazetted into law.

The Minister for Finance gazetted the Regulations into law as Kenya Gazette Supplement No.72 dated 9th October 2000.

Since then, several other Regulations have been developed in consultation with stakeholders and been gazetted. These are available on the RBA Website www.rba.go.ke
2. Can a scheme withhold a members’ benefits on behalf of a sponsor due to for example unpaid loans, fraud etc.?

No, the scheme is a separate entity from the sponsor and the sponsor does not have any rights to appropriate the benefits just like any other person who the worker may owe money has no right to do so.

Retirement benefits are supposed to provide for the worker in retirement and once these are vested in a member they belong wholly to that member. Employers can recover owed amounts from other terminal benefits or through the courts as is the case with other creditors
3. Why does the RBA find it necessary to set investment guidelines while schemes are already required by the Act to utilise the services of professional Managers?

Investment guidelines in the RBA Regulations only provide maximum exposures for the broad asset classes that a scheme can invest in.

These guidelines are only meant to ensure adequate diversification and they do not mandate investment in a particular asset class.

Indeed, schemes are free to choose, with the advice of the scheme’s fund manager, which particular broad asset classes to invest in or which to exclude altogether depending on their specific liability profile.

Further, the schemes retain full discretion as to which investment to make within any particular asset class.

With regard to the particular maximum percentages that have been set for the particular asset classes, the views of stakeholders were incorporated in determining the limits.

Where a scheme temporarily exceeds the maximum limits, in the course of investing the scheme funds, the RBA allows the scheme to file an action plan indicating how it will come into compliance.

The RBA from time to time amends the regulation to bring in new asset classes that the schemes can invest in and to review the maximum percentages on all asset classes.

4. Will the RBA charge a Levy to Schemes?

The Act makes provision for a levy on schemes.

In the Regulations the Authority has come up with a graduated levy that declines with scheme size.

The levy should be viewed as a small fee for services provided by the Authority to the schemes and their members and sponsors.

These services come in the form of trustee training, member education, research on investments, negotiating for tax incentives and providing an appeals mechanism for aggrieved scheme members among other issues of benefit to the sector.

The Authority will also provide service to schemes indirectly through its regulation of the sector in order to protect the interests of scheme members and sponsors.

5. Why is the levy based on assets and not income? Basing the levy on assets can diminish the capital during years of low returns?

Use of scheme assets, as the basis for calculation of the Levy, is the most equitable method since those schemes with large memberships or higher wages will automatically have higher assets and will therefore pay a higher nominal levy.

The highest levy rate is only 0.2% of assets and it is extremely unlikely that a scheme with a properly diversified portfolio would have such a low rate of return on its investments. A maximum of KShs. 5 million has been set for the levy payable by any scheme. This amount will be reviewed by the Minister in consultation with the RBA from time to time.

The effective levy rate reduces as schemes grow larger thus acting as an incentive to the development of schemes.
6. It is said that compliance with the Act particularly the separation of service providers’ roles led to increased costs to schemes?

The Authority is aware that some initial expenses were incurred, for example, in amending scheme rules, undergoing an actuarial review, transferring assets to a custodian etc., but this should be seen as one off cost of streamlining the management of schemes. The Sector has grown in size and stability since regulation by the RBA was put in place.

More and more service providers such as managers, custodians and actuaries continue to enter the market to provide the required services to schemes. This enhances competition and will continue to drive down prices.

The resultant benefits in terms of higher investment returns, enhanced transparency and accountability in scheme affairs, and protection of benefits in case of failure of a service provider have been demonstrated to far outweigh any perceived increase in costs.
7. Will the RBA’s involvement in the running of schemes be excessive? Will schemes be required to seek prior approval from the Authority when paying benefits to individual Members?

The RBA is only a regulatory body for the industry and is not involved in the day-to-day running of the affairs of schemes.

The Authority’s approval is not required for matters governed by the scheme Rules except where payment is made to the Sponsor as a result of winding up of a scheme. Each scheme is however required to file its Trust Deed and Rules with the Authority at the outset.
8. Why must schemes prepare audited accounts and why is the deadline for preparing the accounts only three months yet company law gives up to six months?

Audited accounts provide an independent verification of the financial statements of the scheme thus giving scheme members a means of confirming that the trustees are taking care of the members’ best interests.

This is one way of increasing transparency and accountability in scheme affairs.

Even though companies are given six months to prepare accounts, in cases where there is an overriding interest of outsiders such as quoted companies or banks then the period is only 3 months. The RBA requirement is therefore reasonable for schemes since members funds are at stake.
9. Is there any conflict between the Retirement Benefits Act and other existing Acts that affect the industry?

There are no major conflicts with any of the existing statutes. In case of such a conflict the Act supersedes other acts in matters relating to retirement benefits.

To avoid misunderstanding, the RBA is continually working with relevant regulatory bodies such as the Kenya Revenue Authority to ensure full harmonisation.

Access to Retirement Benefits

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.

RBA and Insurance Industry

Why is the Retirement Benefits Authority (RBA) against the Insurance Companies yet they have been playing an important role in the pensions sector?

The RBA is not against insurance companies and expects them to continue to play an important role in the retirement benefits sector.

The insurance industry manages 70 percent of the schemes in the country and almost 10 percent of the total assets of the sector.

There is no rule barring insurance companies from continuing to do business in the industry, indeed, schemes are allowed to invest 100% of their assets in guaranteed funds such as those issued by insurance companies. This is the only investment class where 100% investment is allowed.

In addition, insurance companies have subsidiaries acting as administrators of retirement benefits schemes. The companies also run a number of individual retirement benefits schemes and pay annuities to scheme members on retirement.

Insurance companies are required to compete with other players in an open and transparent manner for the good of the scheme members and sponsors.

What is the practice in other countries on retirement schemes? Do insurance companies administer the schemes?

The role of the insurance industry in the retirement benefits sector differs from country to country ranging from a zero role in some to a significant one in others.

However, in all countries, insurance companies must conduct retirement benefits business in an accountable and transparent manner and the interests of the members of a scheme must be protected. This is what the RBA expects from the Kenyan insurance companies.

Is it true that the RBA is against the pooling of scheme funds?

No, the RBA is in-fact encouraging schemes to adopt the pooling method.

The Retirement Benefits Regulations, 2000 contain specific provision for pooling of funds.

Pooling must, however, be done in a transparent manner so that the interests of any particular scheme or member are not violated.

Are schemes that are invested 100% in guaranteed funds required to appoint managers and if so why?

Yes, the Retirement Benefits Act requires all schemes to appoint a manager and a custodian.

There are many approved issuers of guaranteed funds and the manager can advise on the most suitable.

The manager will also advise on other available asset classes and as to whether the scheme should diversify its investments.

The Role of the Authority

What are the specific objectives of the Retirement Benefits Authority (RBA) according to the Retirement Benefits Act?

· To regulate and supervise the establishment and management of retirement benefits schemes.
· To protect the interest of members and sponsors of retirement benefits schemes.
· To promote the development of the retirement benefits sector.
· To advise the Minister for Finance on the national policy to be followed with regard to the retirement benefits sector.
· To perform such other functions conferred by the Act or any other written law

Will the RBA handle terminal benefits normally covered by labour laws?

No. the RBA only handles matters touching on retirement benefits and gratuity payments.

The creation of the RBA has been seen as a contradiction of the Government stated policy of liberalisation. Are we moving back to a controlled economy?

As a regulatory body the RBA only oversees the sector and does not take direct control of schemes or their funds.

· The role of the RBA is similar to that of the Central Bank in the banking sector or the Capital Markets Authority in the capital markets sector.
· The RBA creates free competition for the various players in the sector on a level playing field.
· Indeed, Section 33 of the Retirement Benefits Act introduces competition for statutory contributions, for example under the NSSF Act, thereby allowing the private sector to compete for these funds.

The RBA has been dismissed by some as an irrelevant body with ulterior motives. Can you comment on this?

· The creation of the RBA was part of the ongoing financial reform process in the country’s economy geared at mobilizing domestic savings, developing the country’s capital markets and enhancing economic development.
· The primary objective of the RBA is to protect the interest of members and sponsors of schemes, to develop the sector and to alleviate old age poverty through enhanced saving for retirement.
· Prior to the creation of the RBA there was no harmonised legal framework governing the sector. This resulted in the well documented cases of mis-appropriation of scheme funds, dubious investments of members’ funds, denial of benefits to members, delay in payments of benefits to members and a myriad of other ills that have bedevilled the sector.

It is said that the RBA has been brought to loot private sector schemes because the schemes in the public sector have already been milked dry?

· The RBA only regulates the sector and does not take control of any schemes or their funds.
· Malpractice in the retirement benefits industry has occurred in schemes in both the private and public sectors, therefore, the RBA regulates the entire industry to minimise such occurrences.
· The RBA Board of Directors has a majority of members from the private sector.
· The Management and staff of the RBA have mostly been hired from the private sector.

Why did Kenya need a retirement benefits act when pension schemes had been operated for many years without even the RBA?

· Even though some pension schemes were well managed there were many cases of others that had not been run efficiently.
· Socio-economic changes have led to the breakdown of the traditional systems of old age support therefore enhancing the need for well-managed retirement benefits schemes.
· Newspapers are replete with stories of denied or delayed benefits, misappropriation of scheme funds, diversion of scheme funds into sponsors business, underfunded schemes that cannot meet their obligations, questionable investments, lending of scheme funds to trustees or senior managers at uneconomic rates and many other problems that are to the detriment of the ordinary member.
· The RBA only regulates the sector and does not directly run schemes or hold scheme funds. Therefore, schemes that are well managed do not have to change much to achieve compliance with the Retirement Benefits Act .
· The objectives of the Act are to encourage long term saving for retirement and to protect members and sponsors from the abuses that have occurred in the past.

Wait a second. Who says I will consume my money if it is paid to me? I am perfectly capable of investing the money myself and catering for myself in retirement thank you very much!

· Surveys carried out by the RBA show that many people who are paid their benefits when they change jobs utilize them on consumption expendituressuch as household goods, weddings, holidays etc.
· Statistics also show that because of accessing benefits every time they change jobs many workers earn very low benefits at retirement despite having saved for 30 to 40 years.
· Most ordinary Kenyans are not knowledgeable about investments and are unlikely to be as good at investment as the professional managers that schemes are required to utilize.
· The reality is that upto ninety percent (90%) of start-up small businesses,such as those set up by people accessing their benefits, wind up within 2 years.
· Even if one is an investment professional he or she is unlikely to earn as much return investing individually as he/she would have earned form the scheme for the following reasons:
o Individual investments would earn periodic simple interest, dividends, rent, interest etc. which are too little to reinvest while the scheme earns compound interest by immediately reinvesting all income.
o The scheme by pooling together many small investors’ funds enjoys economies of scale in investment resulting in lower costs and higher returns. Also a scheme, can invest in instruments which are not available to small investors due to the prohibitive minimum requirements. These include Treasury Bills, Commercial Papers, Real Estate and high price Equities.
o Benefits paid out before a member’s retirement age are subject to punitive taxation rates compared to those applicable to benefits paid at retirement. You will thus start off with upto a third (1/3rd) less than what you would have left in the scheme.
o Retirement benefit schemes do not pay tax on the investment income they earn. If you invest on your own, you will pay hefty withholding tax on all the dividends, interest, rent or profits that you may earn.
o In addition, members attract lower tax rates on their benefits including tax free amounts for any lumpsum they take at retirement and also the monthly pension. Members who are 65 years of and above do not pay tax on their retirement benefits.

· Life expectancy at birth in Kenya is indeed 62 years (2016). This figure is low because of the high infant mortality and high level of deaths from HIV/AIDS within the 15 – 40 age group. This is a global figure for all Kenyans yet members of retirement benefits schemes are mostly formal sector workers whose life expectancy is much higher, last estimated at 78 years, and has in fact been increasing. Life expectancy at say age 35 is also not the same as life expectancy at birth. If you are counting on dying young you better stop cheating yourself and start thinking about how you will live when you retire.
· In the tragic event that you do die before retirement age, the money left in your retirement benefits kitty is not lost but is paid immediately to your survivors such as your spouse and children in accordance with the nomination that you yourself will have made earlier.
· You will therefore surely agree that they will be much better off than if you had been paid earlier and have already consumed the money.

What other changes have been brought in by the RBA which will affect me?

· In a defined benefit scheme, pensioners will now enjoy annual pension increases to be determined by an actuary unlike in the past where pensions could remain static for years and be eroded by inflation.
· You are now able to use your accumulated benefits as security to secure a housing mortgage.
· If you are in a pension scheme and your accumulated benefits will yield a pension below the minimum wage (referred to as trivial pension) you can commute the entire benefit into a single lump sum. The trivial pension is adjusted every time there is an adjustment to the minimum wage.
· If the trustees fail to pay you within 90 days of your benefits falling due, you are now entitled to continue earning interest on your benefits during the delay period.
· The vesting period for employer contributions (that is those contributions becoming legally yours) in individual schemes has been reduced to three years from five years
· If the scheme requires purchase of an annuity at retirement age, you get to choose the annuity company unlike in the past when trustees would choose on your behalf.
· Members are now key stakeholder in their schemes as they are part of the Board of Trustees.
o In a Defined Benefits scheme, they form at least one third (1/3rd) of the membership.
o In a Defined Contribution scheme, members get to nominate 50 percent of the trustees up from 1/3 previously.
· Also a defined contribution scheme cannot deny you membership even if you are close to retirement age.
· A defined contribution scheme cannot deny you membership even if you are close to retirement age. Defined benefits schemes on the other hand require a longer period of membership, usually a minimum of five years.
· Tax deductible contribution limits have been increased and are continually under review.
· If your employer deducts money from your salary but fails to remit it to your retirement benefits scheme, the employer is liable for criminal prosecution.