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Home Pensions

Understanding how to access your pension savings in Kenya.

Christine Akinyi by Christine Akinyi
June 27, 2025
in Pensions
Reading Time: 2 mins read

Retirement planning is a critical aspect of financial well-being, and saving in a pension scheme is one of the most effective ways to ensure a comfortable life after your working years. Pension schemes are designed to allow individuals to make regular contributions during their productive years and then access their savings upon retirement. These schemes also provide support to beneficiaries in the unfortunate event of a member’s death.

There are several compelling reasons to save in a pension scheme. Firstly, it allows you to maintain your desired lifestyle even after retirement, much like saving for a long holiday, only that retirement can last decades. Secondly, pensions harness the power of compounding, where your savings generate returns that are reinvested to grow even further. Moreover, members enjoy tax relief of up to KES 30,000 monthly, making it a tax-efficient savings tool. Most importantly, having a pension reduces the likelihood of becoming financially dependent on your children or relatives in old age.

While the best practice is to keep contributing consistently until retirement, there are instances where one may need to access their pension savings early. This is known as early leaving. A member exiting a pension scheme before the retirement age has four options:

  1. Transfer the accumulated savings to another registered pension scheme.
  2. Defer the benefits by leaving them in the current scheme, which can be accessed at or after age 50.
  • Withdraw part of the savings, specifically, the member’s portion and up to 50% of the employer’s contributions. The rest remains in the scheme.
  1. Emigrate, in which case, if the member has no intention of returning to Kenya, they may access the full amount including the employer’s portion.

Under the Income Tax Act, a tax-free lump sum is available on early withdrawal due to ill-health, medical grounds, or after 20 years of membership, regardless of age. It doesn’t matter whether you’re in a pension scheme, provident fund, NSSF, or a personal retirement fund you won’t pay tax on any lump sum withdrawals above the usual KES 600,000 tax-free limit, or the first KES 300,000 each year if you’re receiving an annuity

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At retirement, access depends on the type of scheme:

  1. Pension Schemes offer a combination of a one-third lump sum and a monthly income through an annuity or income drawdown.
  2. Provident Funds allow members to receive their entire savings as a lump sum.

In conclusion, the generous tax incentives and flexible access options make pension schemes a worthwhile long-term savings strategy. However, early withdrawals can erode your retirement benefits, so it’s advisable to let your savings grow uninterrupted to maximize the benefits.

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