UPDATE ON FINANCIAL EDUCATION CAMPAIGNSUPDATE ON FINANCIAL EDUCATION CAMPAIGNS

A PRESENTATION BY A PRESENTATION BY

EDWARD ODUNDOEDWARD ODUNDO

CHIEF EXECUTIVE OFFICER CHIEF EXECUTIVE OFFICER

MENA WORKSHOP ON PRIVATE PENSION REGULATION AND SUPERVISION

AGENDA

Location of Kenya

Kenya’s Retirement Benefits Structure & Membership

Current status of Pensions Coverage and Replacement Rate

Attitude and Perception towards Retirement

Pension Education Campaigns

Challenges

Way Forward 2

Location:

Kenya’s Retirement Benefits Structure & Membership

The Civil Service Pension Scheme – 22%Non contributory & UnfundedCovers all service employeesExempted from Retirement Benefits

Authority Supervision Legislated by Act of Parliament

National Social Security Fund (NSSF)-67%Provident FundContributory & funded (both employee

and employer) Accounts for 28% of total industry assetsCovers all employer with 1+ employeesRegulated & Supervised by RBA

Private Occupational Schemes – 11%contributory & fundedAccounts for 70% of Industry Assets Covers employees of the employer Regulated & Supervised by RBA Legally formed under trust deed 1282 schemes (Estimated membership

– 400,000)

Individual Retirement Benefits Schemes-0%Contributory & fundedOpen to all - formal & informal workersRegulated & Supervised by Retirement

Benefits AuthorityLegally formed under trust deed20 Individual Retirement Benefits Schemes Estimated membership15000

Current status of Pensions Coverage and Replacement Rate

Pension saving is a voluntary exercise and not mandatory

No universal pension – Pilot cash transfer programme targeting senior citizens (over 65 years) introduced in 2009

Only 15 % of the workforce is covered (mostly in the formal sector)

Plans underway to reach the more than 80 % that was not covered (informal sector )

Low replacement rates (at 20%) – people not saving enough to increase income replacement ratios at retirement

Attitude and Perception towards Retirement

The concept of retirement (to many) does not involve pension schemes– (mainly associated with savings for assets - house, land, cows etc)

Perception problem:

Suspicion that scheme providers may collapse with members savings or may just refuse to allow them access to the savings

Employer’s responsibility to drive the pension agenda

Retirement is too far away so why worry about it now?

Culture:

Traditionally children take care of Parents/elderly

Stigma associated with retirement – feared, even dreaded. Considered untrendy – avoided by the young. Society not retirement friendly

Pension Education Campaigns

RBA has adopted a Multi-faceted approach to pension education

Some of the Education Platforms leveraged include:

Public Education campaign

Trustee Training

Retirement Planning Seminars

Open Day

Media Education

Road Shows

Trade Fairs

Financial Education School curriculum – In progress7

Public Education Campaign:

Public Education Campaign “The Questions Campaign” April 2009 – June 2010

Trustee Training SeminarsRBA runs a Trustee training programme targeting individual trustees at no cost to schemes to improve scheme administration and enhance the sector’s growth through improved governance.

One day curriculum covers the following topics: The general role & Responsibilities of Trustees Compliance requirements The role of Trustees in Investment of retirement Benefit Scheme assets Taxation National Insurance Hospital Fund products Groups exercises

Majority of participants are1st-time participants

To date, all the 1300 registered schemes have at least one trained Trustee

Trustee training available to all schemes irrespective of compliance status

Development of a Trustee Training Certification Programme in collaboration with College of Insurance, Humber Center for Employee Benefits, Canada and Association of Retirement Benefits Schemes (ARBS) is in progress to be launched in June 2011

Retirement Planning Seminars Previously Pre-retirement seminars targeted scheme members 50 years

and above. The seminars have since been renamed “Retirement Planning seminars” with no age limit

Objective:

To equip members with investment and social skills to help them cope with life in retirement

Key Topics:

Testimony from a retiree

Benefits

Time Management

Attitudes to retirement

Investment & Personal Financial Management

Health Issues in retirement

Challenges

Increasing coverage in an environment where Retirement Saving is voluntary

Revocation of the Preservation Rule has unlocked the Employers portion of benefits allowing members to withdraw 75% of their benefits before attaining retirement age

Competition from other saving options offering more attractive products i.e. Cooperative Societies, Bank Savings Accounts, Property, Equity, Investment Groups, etc

Changing the orientation of Kenyans from a spending culture to a saving culture

Way ForwardIntensify efforts to increase awareness levels on the need to save for retirement using:

Mass MediaVernacular FM Radio stations with regional captive audienceTV Programming to influence contentPrint Media – through a pension column

Demonstrate value for saving through a Pension plan using clear illustrations that show benefits that will be derived from long-term saving using a pension calculator

Partner with Ministry of Education to introduce financial literacy curriculum in schools to inculcate a saving culture in children at an early age to change attitude and shift orientation from that of a spending culture to a saving culture

Build Media partnerships to enlist their support to amplify messages on pension issues with a view of reaching targeted segments across the various platforms

Continue to lobby Government to make pension saving compulsory

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Thank You

Asante

Thank you Edward Odundo, MBS

Chief Executive Officer

Retirement Benefits Authority

P.O. Box 57733, Nairobi, Kenya

Web: www.rba.go.ke