Sharp Daily
No Result
View All Result
Thursday, July 10, 2025
  • Home
  • News
    • Politics
  • Business
    • Banking
  • Investments
  • Technology
  • Startups
  • Real Estate
  • Features
  • Appointments
  • About Us
    • Meet The Team
Sharp Daily
  • Home
  • News
    • Politics
  • Business
    • Banking
  • Investments
  • Technology
  • Startups
  • Real Estate
  • Features
  • Appointments
  • About Us
    • Meet The Team
No Result
View All Result
Sharp Daily
No Result
View All Result
Home Money

Why Employers Should Prioritize Pensions Over One-Time Gratuity Payments

Faith Ndunda by Faith Ndunda
July 10, 2025
in Money, Pensions
Reading Time: 2 mins read

A pension is a retirement plan that provides regular income to individuals upon retirement. Contributions in pensions are made by both employer and employee in umbrella or occupational schemes or by individuals in personal schemes. Gratuity on the other hand is a lumpsum payment, paid by the employer to an employee as a token of appreciation for the years of service. In gratuity, the employer makes the contributions and is paid either at the end of service or after a specified period, as determined by the employer.

Regarding tax treatment, pension funds enjoy tax benefits from contributions and savings. Pension funds enjoy tax relief on contributions of up to KES 30,000.0 per month. Additionally, pension funds provide tax exemption on savings for those who have retired from a registered scheme after a minimum of 20 years or have retired early due to ill health. Similarly, contributions to gratuity enjoy the same tax advantages as pensions. However, payment of gratuity is exempted from tax only if made under a public pension scheme.

Pensions savings can be withdrawn upon reaching the retirement age as per the scheme’s policy. Members who make additional voluntary contributions (AVCs) are also allowed to access those funds before the age of 50. In addition, members with critical illnesses and those who permanently relocate from the country are permitted to access their retirement savings before their retirement age. However, for gratuity one can only access their savings upon retirement, resignation or termination. Notably, you can transfer your gratuity benefits to a pension scheme.

Pensions schemes in Kenya are regulated by the Retirement Benefits Authority (RBA), whereby the fund manager invests scheme assets, the trustee oversees the fund’s governance and compliance, the administrator manages member records and benefits, and the custodian securely holds the fund’s assets. This structure ensures transparency, accountability, and segregation of duties, safeguarding members’ benefits and promoting efficient and compliant management of pension funds, while maintaining independence from the employer’s influence. The RBA Act allows members to change retirement schemes without losing their savings or incurring tax. The regulation nature of pension funds also makes employer contribution mandatory unlike gratuity, where it is only mandatory if stated in contract or via Collective Bargaining Agreement. For gratuity, the employer has full control of the funds. An employee might not be entitled to their gratuity if their employment contract has conditions such as minimum service length or age. Additionally, if one is terminated due to gross misconduct or summary dismissal, they might lose their gratuity.

RELATEDPOSTS

Business and Finance Concept - Coin, Currency, Financial Item, Graph,

Opinion: Why lower taxes may be Kenya’s only escape route

July 10, 2025

Nvidia becomes the first company globally to hit USD 4.0 trillion market value

July 10, 2025

For individuals who want to enjoy a lifetime income with tax benefits and high returns, choosing a registered pension scheme is the best option.

 

Previous Post

Opinion: Why lower taxes may be Kenya’s only escape route

Faith Ndunda

Faith Ndunda

Related Posts

Pensions

The importance of Investment Policy Statements (IPS) for pension schemes in Kenya

July 4, 2025
Pensions

Understanding Life Cover as an Additional Benefit in Retirement Benefit Schemes

July 4, 2025
News

Private vs Public Pension Funds in Kenya

June 30, 2025
Pensions

Understanding how to access your pension savings in Kenya.

June 27, 2025
Analysis

Kenya’s CIS market: Q1′ 2025 shows a surge, setting the stage for future expansion.

June 26, 2025
1049795356
Pensions

CIDDF vs Annuities: Choosing the Smarter Retirement Income Option

June 19, 2025

LATEST STORIES

Why Employers Should Prioritize Pensions Over One-Time Gratuity Payments

July 10, 2025
Business and Finance Concept - Coin, Currency, Financial Item, Graph,

Opinion: Why lower taxes may be Kenya’s only escape route

July 10, 2025

Nvidia becomes the first company globally to hit USD 4.0 trillion market value

July 10, 2025

Privatization in Kenya: A new dawn for capital markets and fiscal stability

July 10, 2025

How Kenya is future-proofing its economy against illicit finance

July 9, 2025

The importance of Investment Policy Statements (IPS) for pension schemes in Kenya

July 4, 2025

Understanding Life Cover as an Additional Benefit in Retirement Benefit Schemes

July 4, 2025

Del Monte foods files for bankruptcy in USA

July 3, 2025
  • About Us
  • Meet The Team
  • Careers
  • Privacy Policy
  • Terms and Conditions
Email us: editor@thesharpdaily.com

Sharp Daily © 2024

No Result
View All Result
  • Home
  • News
    • Politics
  • Business
    • Banking
  • Investments
  • Technology
  • Startups
  • Real Estate
  • Features
  • Appointments
  • About Us
    • Meet The Team

Sharp Daily © 2024