Life after retirement in Kenya: what retirees told us

Why we did this study

Many people picture retirement in Kenya as a time of rest and comfort. Our study starts from a harder picture: reports of meagre monthly pensions after a good career, late-life illness wiping out a family's savings, and evidence of poverty in old age.

Retirees also carry more of the risk than they used to. Many employers have converted or wound up defined benefit schemes, which paid a guaranteed income for life, in favour of defined contribution schemes. When we wrote the report, formal pensions covered just over 15% of Kenya's working-age population.

Most research on retirement in Kenya has used fixed, numbers-based questionnaires and has looked mainly at the years before retirement. Working with Strathmore University's social security study group, we set out to hear from retirees themselves: what does well-being in retirement mean to them, and where does money fit in?

Retired but not tired

The retirees we interviewed did not describe retirement as the end of an active life. The most common way they defined it was as change, followed by rest and transition. As one put it, retirement "does not mean you go out there and just sit around. It is a different type of active life."

Those who stayed active were engaged in agribusiness, formal employment and rentals. Rest, freedom of choice, family time, personal health and the chance to give back all lifted their well-being. On the other side, they missed leave and work benefits, and some felt a loss of status in their community.

Participants also reported better well-being as they moved into retirement, which fits the idea of an early 'honeymoon' stage. That raises a question for employers and trustees: does pre-retirement training prepare people for the changes that come later?

Money, health and family

Pension income on its own was not enough, and participants spoke of a strong need for other income to bridge the gap. Besides their pension, they named nine other sources, from rental units and agribusiness to chamas, merry-go-rounds and shares. Rental income stood out because it is permanent and can be passed on.

Spending changed shape. Before retirement, children's fees were the biggest expense; after retirement, food was. Very few felt their expenses had gone down, and some said the diet they now need makes food expensive.

Health was the sharpest worry. Limited medical cover was the top financial concern, ahead of reduced income. Half of those we interviewed had NHIF cover, and participants were wary of private insurance after meeting limits on what it pays for; one left a cover that refused to pay for diabetes.

Family and community carried much of the load. Welfare groups were popular, helping members through bereavement and other problems. Every participant wanted to leave their children some wealth, which may explain why so many put their lump sum into building rental units.

I am retired but am not tired, am an active person.

What this means

For members and those nearing retirement: the retirees told us where they felt least prepared. The gaps they named were budgeting in retirement, paying for chronic disease, ways to increase retirement savings, starting early, family stability, and how pension benefits are worked out and accessed.

For employers and trustees: a majority of the retirees had been prepared through formal pre-retirement training run by their employers. We recommend that these programmes follow a reviewed and widely accepted curriculum, and the early 'honeymoon' we saw suggests training should look beyond the first years of retirement.

For policymakers and the industry, our recommendations include a move to a mandatory defined contribution pension scheme, compulsory and fully tax-exempt saving for medical needs, and a review of pension-backed mortgages, whose uptake has been remarkably low since the 2009 rule change. We also question whether the Older Persons Cash Transfer can be sustained as the older population grows.

Our sample was small and better off than most: retirees with a workplace pension and an average monthly pension above Kshs. 50,000, a group the report puts at less than 5% of Kenyan retirees. The report points to extending the research to retirees with other incomes and at later stages of retirement. The full report sets out the method, the charts and many more of the retirees' own words.

What we recommend

• Move to a mandatory defined contribution pension scheme, growing the national savings pool.
• Make saving for medical needs in retirement compulsory and fully exempt from tax.
• Review why pension-backed mortgages are little used: the gaps in implementation, the law, and new home-ownership products.
• Base formal pre-retirement training on a reviewed and widely accepted curriculum.
• Research life after the early 'honeymoon' stage of retirement to guide products, policy and retirees' coping.
• Give retirees access to social amenities and services at discounted rates.