Contribution of Pension Savings to Economic Development

According to the reports by RBA and KRA, the pension funds under management in Kenya had grown to Kshs. 1.5 trillion as of June 2021.

Retirement benefits are naturally long-term investments, this is because of their long maturity dates. Given the right conditions, pension funds' capital can contribute to the development of the real economy and drive growth by making long-term investments and in the long run, financial stability.

Major contributions of pension saving to the economy of a country are as follows;

1.??????Reduces dependence of the young working generations – children as a retirement plan. Retirees can manage to get basic needs without depending fully on their children for survival. The circulation of money in the economy is accelerated.

2.??????Reduces dependence on the government by old. The government, especially in Africa sets aside a certain budget to cater to the retired members of society who can not manage to put a meal on the table.

3.??????Stimulates economic development. A pension is a long-term savings plan. The pension funds are a pool of potential capital for economic development. They can be invested to finance term government projects to accelerate economic development. The fund managers invest these funds in different sectors of the economy regulated by RBA.

4.??????Promotes a savings culture among the citizens of a country. The working population gets to understand that you do not have to consume everything you earn. It’s good to set aside some money for use later. These funds create a pool for potential investment to spur economic growth and development.

A push for employers to set up pension schemes for their employees and for Kenyan citizens both employed and unemployed to join pension schemes will see the pension funds grow steadily.

Looking to set up a Pension Scheme for your employees? Talk to an expert. Reach out to me at 0732 910 944.