9/26/2009. Its is only through saving for retirement that individuals are able to maintain or improve their standard of living on retirement

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1 W h y S a v e f o r R e t i r e m e n t? Prevent Old Age Poverty Provide contigency funds in case of ill health or death. Provide basic/reasonable income after working life Replace pre-retirement income Security in investments Avoid serious disruptions of living standards in retirement Source of lumpsum income Its is only through saving for retirement that individuals are able to maintain or improve their standard of living on retirement Assets/Income Typical Individuals' Income Over Time Age saved for retirement Did not save for retirement W h e n c a n I s t a r t s a v i n g f o r r e t i r e m e n t? No matter what one s age or disposition, it pays to start sooner than later Financial advisers agree that the sooner people start saving for retirement the better. T o t a k e a d v a n t a g e o f t h e t i m e v a l u e o f m o n e y. I f f r o m a g e 2 5 t o 6 5 y o u i n v e s t 3, a m o n t h ( i n t e r e s t o f 9 % ) a t a g e 6 5 y o u l l h a v e m i l l i o n i n y o u r r e t i r e m e n t f u n d. W a i t t e n y e a r s u n t i l a g e 3 5 t o s t a r t a n d y o u l l h a v e a b o u t K s h s m i l l i o n. W a i t t w e n t y y e a r s u n t i l a g e 4 5 a n d y o u l l h a v e o n l y K s h s m i l l i o n a t a g e 6 5. W h y t h i n k a b o u t r e t i r e m e n t p l a n n i n g n o w? People are spending more years (16 to 20 years) in retirement. Occupational Schemes and NSSF benefits are most often insufficient to cover the cost of living. Inflation may diminish the purchasing power of your retirement savings. 1

2 W h a t i s t h e b a r r i e r t o s a v i n g f o r r e t i r e m e n t? W h e r e c a n I s a v e f o r r e t i r e m e n t? The main barrier to financial freedom is our habits if we start early the habit in the game, its easy. Many adults don t tuck away money for retirement until later in their lives because they are busy:- starting careers going back to school paying off other debts may be starting to pay down a mortgage 2 Options 1. Thr occupational retirement benefits schemes or (EMPLOYED) 2. Thr individual retirement pension plans ( Formal & Self Employed) B e n e f i t s o f s a v i n g t h r R e t i r e m e n t S c h e m e s Money compounds with the interest which if increases with time Tax advantages- in a registered scheme Security- retirement benefits cannot be attached Minimum risk Investment income generally better than rates offered by banks Food and clothing Housing Health Needs-spectacles, medical,dental Providing for the dependants Lifestyle-leisure, holidays Others- car maintainance,insurance Different individuals and households have different needs and expectations 2

3 CIC JIPANGE PENSION PLAN Many Kenyan retirees admit that retirement resources are not adequate for their retirement. Given another chance they would save more Individually, Kenyans need to plan and save for their retirement Retirement Benefits form only one source of resources for retirement other resources need to be accumulated as well Occupational Pension Schemes are only one corner stone of retirement benefits savings Additional Voluntary Contributions (ADVs) can be made to supplement the official contributions It is important to assess one s retirement needs and make effort to accumulate sufficient resources No matter how young or how old you are, retirement planning concerns you directly. Don t put it off till tomorrow If you fail to plan for your retirement, you are planning to fail in retirement Make it a personal responsibility to ensure that your friend,spouse,neighbour and relative saves for retirement..before you retire Objective to provide financial protection at old age Feature investment accumulation account that is Simple, Secure, Flexible and Portable I n d i v i d u a l P e n s i o n P l a n Scheme JIPANGE SPONSOR-CIC INSURANCE TRUSTEES- MD,PM, MNW, DK, MAKAA, JW, AW ADMINISTRATOR-Internal ( Timothy) FUND MANAGER- African Alliance CUSTODIAN- KCB AUDITOR LEGAL ADVISOR Vs Occupational CIC STAFF SCHEME SPONSOR-CIC INSURANCE TRUSTEES- EE-Odhiambo,Tomno, ER-Chairman, Mr. Ashira & Mr. Olalo ADMINISTRATOR-Internal ( HRM) FUND MANAGER- CO-OP Trust CUSTODIAN- NIC BANK AUDITOR LEGAL ADVISOR 3

4 Saving plan with attractive interest rates Tax relief on contributions upto Kshs 20,000/= p.m or Kshs 240,000/= p.a. Tax exemption on interest earned Flexible contribution options Security in investments Reliability arising from RBA regulations Access to CIC JIPANGE workshops FINANCIAL INDEPENDENCE AT OLD AGE Self-employed individuals-informal sector Contract employees and casuals Domestic workers Individual with existing pension plan who want additional benefits-avc s- e.g CIC STAFF Employees in institutions that do not provide retirement schemes e.g private schools,religious institutions, SMEs. Eligibility Age Limits years Contributions At least kshs 500/= per month Maximum unlimited-subject to tax guidelines Payable Weekly, monthly, quarterly or annually Single lump-sum contributions acceptable Transfers for other schemes allowed Payment Mode M-Pesa Cheques Check-offs 4

5 O n L e a v i n g E m p l o y m e n t D e a t h b e f o r e r e t i r e m e n t Continue contributing to CIC JIPANGE Transfer the accumulated fund to the new employer s pension scheme if available. Withdraw 100% of the employee s accumulated fund subject to tax Employer s accumulated fund accessible at retirement only. Except when the contributor migrates to another country as a resident. Payment of the accumulated fund is made to the nominated beneficiary (ies) F i n a n c i a l S t a t e m e n t s On attainment of the selected retirement age ( btw 50-75yrs) Early retirement 50 yrs Normal retirement 55 yrs Late retirement 75 yrs At retirement the all the accumulate contribution plus interest will be paid Financial report on the performance of the Fund will be prepared and availed to members on annual basis. Each member s statement will be sent to the member on annual basis in lump sum convert to a monthly pension 5

6 Thank You Current- Non- contributory ER Contributions Only Proposed scheme-contributory EE- ER- 15% 09-2% 10-5% % Vesting scale 0-5yrs-Nil 5yrs-50% 6yrs- 10 yrs =60% 10 yrs and above=100% Source: Daily Nation-27/03/09 C i v i l S e r v a n t s S c h e m e v s B u d g e t 08/ B (180,000 pensioners)=3.4% (760B) World Bank s threshold- 2.5% 09/10-30 B B Source: Daily Nation-27/03/09 6