Retirement Benefits Schemes

Frequently Asked Questions

• What is a retirement benefits scheme?

  A retirement benefits scheme is an arrangement where employers and/or employees contribute towards the retirement savings of employees/members.

• What types of retirement benefits schemes do we have in Kenya and globally?

  There are various types of retirement benefits schemes in Kenya and globally. Some of them include defined contributions DC schemes, defined benefits DB schemes, occupational schemes, individual pension plans, public schemes, private schemes etc.

• What are the retirement benefits scheme offered by Equity Life Assurance (Kenya) Limited?

  ife Assurance (Kenya) Limited [ELAK] offers the following retirement  benefits solutions:

  1. We have 2 registered Umbrella Funds i.e. Equity Umbrella Retirement Fund (Pension Section) and Equity Umbrella Retirement Fund (Provident Section). An Umbrella Fund is a retirement benefits scheme set up by a founder and it allows multiple unrelated employers to join the Fund as participating employers.
  2. Equity Individual Savings & Retirement Plan. The scheme is set up for individuals and groups who wish to save for their retirement with or with out employer involvement.
  3. Equity Income Drawdown Fund. This is a pension investment plan that allows retirees to draw down their retirement benefits on regular basis while thebalance is invested.
  4. Deposit Administration Services and Pension Administration Services available to retirement benefits schemes

  *Please note the above services/products could change periodically depending on the market needs and the regulatory environment.

   

• What is an occupational/Stand-alone Scheme?

  Occupational Schemes or stand-alone schemes are retirement benefits schemes set up by employers for provision of retirement and related benefits to their employees and their dependents. The sponsor (employer) sets up the scheme and appoints either a board of trustees or a corporate trustee to manage the scheme. 

• What is the difference between Defined Benefits (DB) and Defined Contributions (DC)?

  Difference between Defined Benefits (DB) and Defined Contributions (DC)
  Defined Benefits	Defined Contributions
  The benefits at retirement is “known” i.e. the amount of retirement benefit is pre-determined based on the final salary, an actuarial factor, number of years of service e.t.c.	The periodic contributions are “known” but the benefit at retirement is “unknown”. The amount at retirement would be determined by contribution levels, investment performance over the years e.t.c.
  The employer bears the liability in their books.	The only liability the employer bears is on unpaid contributions.
  Requires actuarial valuations	Actuarial valuations are not mandatory but good to have
  Investment risk is borne by the employer	Investment risk is borne by the member

  *due to the cumbersome nature of managing a DB scheme, most DB schemes are closing and some are converting to DC schemes in Kenya and globally.

• What is the difference between a private scheme and NSSF?

  NSSF is a statutory and mandatory scheme for all employers. An employer could also choose to set up an occupational scheme or join our Umbrella Fund (this is at the discretion of the employer). 

  The NSSF regulations permit employers that have a private scheme to contract out NSSF Tier II contributions and remit those to the private scheme.

• What are the tax benefits to members participating in a retirement benefits plan?

  Members contributing to a registered retirement benefits scheme enjoy various levels of tax relief.

  • The initial tax benefit is a tax-deductible amount of KShs 20,000 per month on contributions.
  • At retirement or exit from employment, members get another benefit of up to KShs 60,000 tax relief for each complete year of service up to a maximum of 10 years.
  • The first KShs 25,000 of monthly pension is also tax-free, and the tax bands used for computing tax on pension are very favourable.
  • There is no tax on either the monthly payout or the lump sum payout after the age of 65 years.
• Will my benefits be taxed if I transfer to another registered scheme?

  No, your benefits will not be taxed during a transfer to another registered scheme. Benefits are only taxed when a member accesses the funds.

• At which age can one retire?

  Normal Retirement Age varies from one scheme to another. Most schemes define normal retirement age as 60 years. 

• Is there an option for early retirement?

  Yes, there is an option for early retirement from the age of 50 years. Some schemes would require employer’s consent for early retirement.

• What happens if I leave employment before I reach the age of 50 years?
  •  If you exit employment before attainment of 50 years you can opt to defer the benefit in the scheme. Here, your benefits will continue to accrue interest but you will not be able to continue contributing to the scheme unless it is an Individual Pension Plan.
  • You can opt to transfer your full benefits to another registered scheme, say the scheme for your new employer or transfer to an Individual Pension Plan (IPP).
  • You can access a certain portion of your savings subject to the protected rights.
• What happens if I am permanently and totally disabled?

  If one is permanently and totally disabled and cannot be gainfully employed, he/she can retire on grounds of ill health. The member will be required to submit certain documents for lodging of an ill health retirement claim to be guided by the scheme administrator. The trustee will then review the case and pass a resolution.

• What happens if someone leaves the country for good?

  When a member is leaving the country with no present intention to return, then an emigration benefit is payable. The member will be required to avail a certain set of documents to aid the trustees in their review and resolution.

• What happens if I die while in service?

  In the unfortunate event of death, your retirement savings will be paid out to your nominated beneficiaries after a due diligence exercise conducted by the trustee(s). If there was insurance benefit embedded within the scheme, the insurance benefit will also be payable to your beneficiaries.

• What is a Nomination of Beneficiaries Form?

  This is a form where you list all your beneficiaries and the respective allocation per beneficiary. This will guide the trustees in the disbursement of your benefits upon demise.

  Members are advised to update it whenever there is a critical change of status, say birth of a new child, upon marriage e.t.c.

• Can I use my savings to get a loan?

  No, retirement benefits are non-assignable. However, you can utilise up to 60% of your savings as secondary collateral to a mortgage.

• Can I make Additional Voluntary Contributions?

  Yes, you can make Additional Voluntary Contributions (AVCs) into the scheme you are participating in. You could also choose to set up a separate Individual Pension Plan account and remit your AVCs to your IPP account.

• What type of investment mandate do you offer?

  Equity offers a guaranteed fund and not a segregated fund through our Life Assurance license. The guaranteed rate of return varies on an annual basis

• How do I lodge a claim?
  • For an IPP- Members lodge claims through our online member portal.
  •  For an occupation scheme- The HR office/relevant office lodges the claim through the HR / Employer portal, and the same is sent to ELAK for processing.
• Can I view my pension account online?

  Yes, you will be able to view your pension account through the Equity Mobile App or Equity Online?

• Can I save for my post retirement medical expenses while in employment?

  Yes, you can contribute towards your post retirement medical fund while in employment. All retirement benefits schemes have a post retirement medical fund embedded within the scheme.

• Which are the additional benefits?

  The clients can bundle their retirement benefits scheme with additional benefits such as a Group Life cover or a Group Last Expense cover at discounted rates.

• How do I join a retirement benefits scheme?

  As an employee, you can join your employer’s pension scheme provided you meet the eligibility criteria as defined in the Trust Deed and Rules. For an Individual Pension Plan, one simply completes the Membership Application Form and the Nomination of Beneficiaries Form. One is also required to attach the required documents i.e. National ID,KRA Pin Certificate. These requirements vary from scheme to scheme.