WANTING: Kenya cannot ignore the retirement crisis ahead

Kenyans are living longer than ever before. Advances in healthcare, better nutrition and a growing focus on healthier lifestyles mean that more people can now look forward not only to reaching retirement but to enjoying many active and fulfilling years beyond it. While this mirrors a global rise in life expectancy, where many scientists believe a child born today could live past 100, it is fundamentally reshaping what it means to grow older.

While this gift of longevity is a remarkable human triumph, it demands a fundamental rethink of our financial future. A century-long life means our retirement savings have to work twice as hard. It poses a vital question – are you truly financially prepared to sustain a longer retirement?

According to the Retirement Benefits Authority, Kenya's pension industry continues to make encouraging progress. Assets under management are approaching Sh2.8 trillion, while formal pension membership has surpassed 7.5 million people. These figures reflect growing awareness of the importance of retirement planning.

Yet the figures also reveal a sobering reality. Only about one in every four working-age Kenyans belongs to a formal retirement savings scheme. Millions of people, particularly those working in the informal sector, are saving little or nothing for life after work. Even more worrying, the RBA estimates that seven out of every 10 Kenyans face financial hardship in retirement because they simply did not save enough during their working years.

This tells us that retirement planning can no longer be viewed as something to think about towards the end of our careers. It needs to become part of our financial planning from the moment we start earning an income.

One of the greatest threats to that income is inflation. A retirement income that feels comfortable today may struggle to cover even basic household expenses 20 years from now. Without increasing retirement contributions over time and reviewing retirement plans regularly, purchasing power is steadily eroded, leaving retirees increasingly vulnerable.

In addition, healthcare presents an equally significant challenge. While medical advances are helping us live longer, they also mean many people will spend more years managing chronic illnesses and age-related conditions.

At the same time, medical inflation continues to outpace general inflation, making healthcare one of the largest and fastest-growing expenses in retirement. Retirement planning can therefore no longer be separated from planning for future healthcare costs.

Traditionally, many Kenyan parents expected financial support from their children in later life. While family remains central to our culture, economic realities have shifted. Younger generations face rising living costs, mortgages, school fees and the financial demands of raising their own families.

The willingness to support ageing parents remains strong, but the financial capacity to do so is increasingly constrained. Financial independence in retirement is therefore becoming less of an aspiration and more of a necessity.

Despite these realities, many Kenyans continue to delay retirement planning. Younger people often believe retirement is too far away to warrant immediate attention. Others wait until they receive a promotion or earn a higher salary before they begin saving.

Many also make the costly decision to withdraw their pension savings every time they change jobs, sacrificing years of compound investment growth to meet short-term financial needs.

Yet one principle remains unchanged, the earlier you start saving, the less you need to contribute to achieve the retirement you want.

Time is the greatest advantage for any retirement saver. Money invested early generates returns and those returns generate returns of their own through the power of compound growth.

Someone who begins saving in their 20s or 30s can contribute significantly less over their lifetime than someone who delays until their 40s, yet still retire with a larger pension simply because their investments had more time to grow. Lost time cannot be recovered.

That is why retirement planning should not simply be about putting money aside whenever possible. It should be a deliberate, long-term financial strategy.

As incomes grow, retirement contributions should increase too. Pension savings should be preserved when changing employers rather than withdrawn, allowing investments to continue compounding uninterrupted.

Employers have an equally important role to play. Providing access to a pension scheme is no longer enough. Employers should actively promote financial literacy, helping employees understand the value of starting early, increasing contributions over time, reviewing and preserving retirement benefits.

Financial literacy is one of the most valuable long-term investments an employer can make in the wellbeing of its workforce.

The financial services industry must also continue to innovate. Retirement solutions need to be affordable, flexible and easy to access, especially for the millions of Kenyans working in the informal economy.

Digital pension platforms and micro-pension products have the potential to make retirement planning available to far more people than ever before.

Ultimately, the message is simple. The earlier you start saving, the less you need to contribute to achieve the retirement you want because your money has longer to benefit from compound growth. Every year you delay is a year of investment growth that can never be recovered. 

Kenya has made tremendous progress in increasing life expectancy.  Our next challenge is to ensure those extra years are not overshadowed by financial anxiety, but lived with dignity, independence and the peace of mind that comes from being financially prepared.

The writer is CEO, APA Life Assurance