Pension Coverage in Kenya: Legal and Policy Framework Required to Enhance Pension Coverage in Kenya

Abstract

Kenya's pension system is fragmented and covers only 15% of the labor force. The enactment of the Retirement Benefits Act in 1997 has not in any significant way impacted on the widening coverage of the pension system. The problem of low coverage is attributable to lack of an effective policy aimed at widening of coverage and the current legal framework which was designed to target participation of formal workers. This paper argues that wide ranging policy and legal reforms are required to enhance pension coverage in Kenya. Recommended policy and legal reforms include: (i) macro-economic reforms to create l employment (ii) provision of funded pension schemes to workers as a term of employment (iii) review of current pension laws to allow participation of employees in short-term employment contract (iv) introduction of social assistance and tax financed scheme, and (v) legal reforms and government incentives to make it flexible and affordable for informal sector workers to participate in the pension system.

Keywords: pensions, coverage, legal reforms