FRED WASWA: Make retirement savings universal

KENYA stands at a pivotal moment in the evolution of its pension landscape.

The reforms to the National Social Security Fund Act—introducing Tier I and Tier II contributions - were bold and necessary.

By raising contributions from a token Sh400 to six per cent from both employer and employee, which caps contribution at 12 per cent, the law signaled a serious commitment to dignified retirement.

For decades, low contributions meant retirees walked away with lump sums that could barely buy them a pair of shoes, as critics quipped.

The new model changes that equation. Tier I, pegged to minimum wage, remains modest. But Tier II is transformative.

Crucially, employers can contract out Tier II to privately managed pension schemes. That is good policy. It expands coverage while offering governance options beyond a single public institution.

Enforcement, too, has improved. Inspectors now reach garages, shops and SMEs previously outside the net. Coverage is widening. Yet mistrust persists. Historical inefficiencies and delayed benefit payments have dented confidence. The answer is not to weaken compulsory savings, it is to strengthen transparency, governance and competition.

Kenya must also diversify pension investments. Beyond government bonds and listed equities, we need deeper alternative assets such as private equity, venture capital, infrastructure funds structured prudently to channel long-term savings into productive sectors.

A vibrant pensions industry can finance enterprise, create jobs and, in turn, enlarge the contributor base.

Retirement security should not depend on where one works or whom one knows. Make occupational pension membership mandatory for every employer.

Preserve the option to contract out Tier II. Tighten oversight. Broaden investment avenues.

Kenyans must also develop a saving culture from a young age. As soon as one gets a source of income, they should start saving for the future.

If we get this right, Kenya will not just increase coverage, it will build intergenerational financial stability and ensure generations retire decently.

The writer is founder and group CEO Octagon Africa Financial Services