Redundancy is one of the most unsettling experiences a working person can face. The immediate concerns are usually practical. Income, bills, and finding new work take centre stage. In the middle of all that pressure, pension planning is the last thing most people want to think about. But the decisions made in the weeks and months after redundancy can have a lasting effect on retirement savings. Understanding your options early makes it easier to protect what you have already built.
The first thing to know is that your pension does not disappear when you are made redundant. The contributions you have already made remain yours. They stay in the scheme and continue to be invested. Redundancy brings your active contributions to a stop. It does not erase the savings already accumulated. That is an important distinction, especially during a period that can feel financially disorienting.
What happens next depends on the type of pension scheme you were in. In a defined contribution scheme, your pot stays invested until you choose to move it or access it at retirement. Its value will continue to rise and fall with investment performance. In a defined benefit scheme, your benefits are preserved based on your salary and years of service at the time your employment ended. This preserved benefit will be available when you reach the scheme’s retirement age.
In Kenya, members of schemes registered with the Retirement Benefits Authority are entitled to their own contributions regardless of how employment ended. Access to employer contributions may depend on the vesting rules of the scheme. If you had not yet completed the minimum service period required, you may only receive your own contributions and the returns on them. Checking your scheme rules as soon as possible after redundancy helps you understand exactly where you stand.
One of the biggest questions after redundancy is whether to access pension savings early. Financial pressure can make this feel like the only option. In Kenya, early withdrawal from a registered pension scheme is generally subject to tax penalties. The amount withdrawn is treated as income and taxed accordingly. This can significantly reduce what you actually receive. Withdrawing early also permanently shrinks the retirement fund. Money taken out early loses all future investment growth. Where other options exist, preserving pension savings is almost always the better choice.
Redundancy payments are worth thinking about carefully. In some cases, part of a redundancy payment can be contributed to a pension scheme. This can help replace some of what was lost during the period without contributions. The tax treatment of redundancy payments and pension contributions varies. A regulated financial adviser can help you work out the most efficient approach for your situation.
The gap between redundancy and new employment is also a good time to review your overall pension position. How much have you saved so far? Are you on track for the retirement income you want? Do you have old pension pots from previous employers sitting untouched? These questions are easy to put off when life is busy. A period out of work, while difficult, can create the space to address them.
If redundancy leads to self-employment or freelance work, pension planning becomes your responsibility entirely. There is no employer making contributions on your behalf. In Kenya, self-employed individuals can register with the NSSF as voluntary contributors. They can also contribute to individual retirement schemes registered with the RBA. Keeping up some level of contribution, even during a period of irregular income, helps protect the long term value of your retirement savings.
When new employment is secured, re-engaging with pension saving should be a priority. Being enrolled into a new employer’s scheme is a good starting point. It is also worth reviewing the contribution rate and considering whether to go above the minimum. If contributions were paused during redundancy, resuming them as soon as possible reduces the long term impact of the gap.
The emotional side of redundancy also matters. Stress and uncertainty can lead to short term thinking. Making big pension decisions during a period of financial anxiety increases the risk of choices that are hard to reverse. Taking time, seeking advice, and avoiding rushed decisions protects both the pension and overall financial wellbeing.
Redundancy is a setback. But it does not have to permanently damage retirement plans. The savings already built up remain intact. The options available provide a foundation to work from. With the right information and a calm approach, it is possible to come through redundancy with retirement plans that are bruised but not broken
