One of the biggest reasons people should save for retirement is so that they can be able to afford the lifestyle they lead in their working days.
Below are some of the reasons why an individual should join an appropriate Retirement Benefits Scheme:
- Compounded and Tax-free Interest – Savings in retirement benefits schemes earn compounded interest. This means that your money grows faster as even the interest earned is reinvested and grows. Additionally, the investment income of retirement schemes is tax-exempt meaning that the schemes have more to reinvest,
- Tax-exemptions on Contributions – Members of retirement benefits schemes enjoy monthly tax relief on their contributions of up to KES 20,000.0 per month, KES 240,000 per annum or 30.0% of their monthly salary, whichever is less. The proposed amendments, to the Finance Bill 2024 will revise the amount upwards to KES 30,000 per month. As such, this lessens the total income tax deducted from one’s earnings and ensures more capital preservation,
- Use of Pensions Benefit as Mortgage Security – When applying for a mortgage, one can use his savings in the various schemes as security. This is essential as it will enable individuals to own homes without the need to look for security,
- Financial Independence upon Retirement – Old age poverty and dependency is currently a scourge where most parents depend on their children and relatives for survival. According to the World Bank, Kenya’s age dependency ratio stands at 69.0%, indicating that the working population has to support most of the non-working population who are individuals below the age of 15 and people above 64 years. However, having a concrete retirement plan ensures that an individual remains financially independent upon retirement and avoids being a burden to relatives and other family members ensuring a dignified life,
- Ascertaining Income Security – Saving in a Retirement benefits schemes allow individuals to be financially secure by accessing funds in case of job loss, retirement, or contract termination as a result of ill-health. Savings will ascertain a continued income stream even if you stop working hence protecting you from being dependent and enabling you to live comfortably, and,
- Earn Returns – Saving for retirement through the Schemes give you an opportunity to be part of an investment portfolio that is structured to optimize investment returns and offer the members above-market average returns. A fund manager and a team of qualified personnel conduct the market research and make investment decisions so you don’t have to worry about it.
