This article focuses on the types of pension plans in Kenya. A pension plan is a type of investment where both employers and employees contribute money into a pool of funds in order to receive defined benefits upon retirement.
Most people end up living miserable lives after retirement. This is a result of failing to plan for what lies ahead. The surest way to live a decent life after retirement is by investing in a pension plan. Anybody earning an income can join a pension plan or scheme.
There are four types of pension plans in Kenya.
1. Occupational Pension Scheme
The scheme is set up by an employer who makes contributions on behalf of employees for the provision of retirement benefits. It is registered by the Retirement Benefits Authority and Kenya Revenue Authority.
Employees under this scheme will receive their funds upon retirement when they resign or get terminated when rendered unable to work due to medical conditions/issues or when they move to another country.
Under this scheme, you can only withdraw your funds in full after retirement. In the event of death or medical emergency, beneficiaries or the next of kin is entitled to have full access to funds.
2. Individual Pension Plan
It is a type of pension plan that is set up by an individual to make contributions towards saving for retirement. It is a good pension plan for those working in the informal sector. This is because of flexible savings plans that fit those in the informal sector or those who are self-employed.
3. Public Service Superannuation Scheme
This is a defined contributions scheme where the government and employees contribute to the scheme to fund retirement benefits. The scheme is meant for civil servants. The scheme is regulated in accordance with Retirement Benefits Act.
4. Umbrella Scheme
It is a type of pension plan that allows multiple and unrelated employers to participate in a single pension scheme. The scheme is cost-effective and hands-free in nature. This explains why it is popular among most of the organisations in the country. The scheme enhances the overall benefits and returns to both employers and employees as it pools the retirement investment of multiple employers.