the social security edition · for informal employees, and lack of a policy ... president uhuru...

The Fund July - December 2018 | Edition 5 1

July - December 2018 | Edition 5

The Social Security Edition

The Fund July - December 2018 | Edition 52

We receive, prudently invest and manage members’

savings for promptpayment of benefits for

secured retirement.


06Implications of social security on the pension industryThe revelation that Kenya’s retirements benefits and savings now amounts to 1.2 trillion shillings is hardly a reason to celebrate.

07Achieving Vision 2030 social protection goalsSenior citizens began receiving the first bi-monthly government stipend of Sh4,000 earlier this year.

08The success story of Tanzania’s social securityTanzanian workers’ funds are being loaned to the government and joint ventures with private enterprises thanks to a new law assented to last June by President John Pombe Magufuli.

15How to maximize your social security benefits If you asked any ordinary Kenyan worker today when they would like to retire, the answer would probably be a number lower than the normal retirement age of 60.

18Social security for Africa’s young population: Looking to the futureAfrica is a continent on the move, whose promise of economic growth, enterprise development and increased trade offers constant attraction to investors.

26The future of social security and retirement planningIf you are feeling extraordinarily reflective, you may be looking many years ahead.

29 Global trends in social security programsSocial security programs are increasing in number around the world.

Contents


Africa is witnessing great transformation in all aspects, from the economical

to the social. And its population is among the youngest in the world. This situation presents great opportunities and risks that leaders on the continent must think about and act on. One of the key changes on the social side is the disappearance of a time honoured social safety net – the family.

Due to urbanization and other economic pressures, children are no longer willing or able to support their parents or other relatives in old age. At the same time, there is little for the young to inherit in the form of land and other resources. This development makes social security planning a key priority for African countries, Kenya included.

As our CEO notes in this issue, the youth bulge on the continent could be of great benefit. However, it could also similarly turn out to be a great resource drain when this burgeoning youth grow old if social security is not well planned.

In this issue, we focus on various social security issues affecting Kenya and look at what African countries, including those

from around the world are doing right. In the Service to All section, we highlight the corporate social responsibility activities engaged in as they supported the Dyslexia Organization of Kenya. In addition, we provide some simple yet effective advice on how to get the most out of your social security benefits.

Read on to enjoy this and much more.

Welcome to the fifth edition of The Fund!

Editors desk

Editor: Galm Jaldesa

Golda Akolo Flevian KubasuMbuiyu Kaiganaine May Jesaro Valentine Shanyisa

Wishing you a Merry

Christmasand a

Happy New Year

2019!


We are committed to consistently facilitate the

provision of value added and timely retirement benefits


Perspective

The revelation that Kenya’s retirements benefits and savings now amounts to 1.2

trillion shillings is hardly a reason to celebrate since this represents a paltry 20 per cent of mainly formal employees with access to sacco services as well as regular incomes.

Kenyans in informal employment and others working in the farms are uncovered and remain the hardest hit by perils of old age. The situation has been aggravated by the continued breakdown of the traditional family that provided social networks for family members, facilitating a smooth and automatic safety net that every member benefited from.

Basically, nuclear families no longer have land to subdivide among their children as they live near their workplaces in rented houses or small plots they own and have built houses. Upon retirement they lack any meaningful income source and largely rely on their children for upkeep.

“Our agenda as a country needs to be forward-looking and consider the interests of its people in an inclusive manner that excites debate around the subject of senior citizens,” said LAPFUND Chief Executive Officer, Mr. David Koross.

Lack of information on the importance of old age saving has compounded the problem since the subject appears to be a taboo among Kenyans obsessed with the culture of ‘mla ni mla leo (the one who eats eats today).

Studies conducted across many Kenyan societies, and considerable scrutiny of the educational curricula, indicate no body of knowledge on the subject is available. With the government giving the subject a wide berth, this leaves a majority of Kenyans to their own fate.

This notion, Mr Koross feels, should be discarded to facilitate a national discourse that could elicit a meaningful direction on how the 80 per cent of Kenyans could benefit from retirement benefit schemes and other old age covers. Some scholars have suggested that the government incentivizes voluntary savers by chipping in a small percentage for regular savers, a move that could endear Kenyans to the various schemes available.

But poor management of workers’ savings by NSSF has discouraged many from saving with the public entity as many incidents of embezzlement remain unresolved to date. Such a scheme also remains impossible to implement with lack of a checkoff system for informal employees, and lack of a policy where informal workers as well as other uncovered Kenyans could benefit from such schemes.

In an interview, Mr. Koross suggested innovative mechanisms where fees charged by saving schemes (banks and saccos) as well as mobile phone expenses should include a small percentage that is deducted and sent to an individual’s retirement benefit scheme.

Implications of social security on the pension industry

Scholars aver that savings must be made mandatory if Kenya is to raise social savings and create a formidable pool of cheap money that the government could borrow from to implement social programmes that benefit savers.

Early in the year, the Association of Pension Schemes in Kenya forwarded a bill to Parliament seeking the formalization of a universal retirement scheme for all Kenyans that could generate new funds for development as well as generate new knowledge on use of technology to enhance inclusion.

Pundits suggest that SMEs should be tax incentivised to enrol their employees to retirement schemes, and that savings for retirement should be made compulsory. This would ease old age poverty and early deaths from manageable ailments. It would also create a new pool of incentives that would see beneficiaries enjoy free travel and treatment as well as other legal and social safeguards such as free housing and care.

Retrenchment and redundancies could be redefined as automatic avenues to access part of one’s savings thereby easing suffering, while part of retirement savings could be spent on a tenant purchase scheme to enable savers to buy a house at their convenience.

Kenya could do well to declare retirement benefits and savings a national issue that requires a national conversation for public good.


Senior citizens aged 70 and above began receiving the first bi-monthly government

stipend of Sh4,000 earlier this year, under the government’s plan to enhance social safety nets for the most vulnerable.

“Each beneficiary receives Ksh. 2,000 a month, adding to Ksh. 4,000 per payment cycle since the Ministry of Labour releases the funds every two months,” said Kenya’s Social Protection Ministry Principal Secretary Susan Mochache.

The stipend – considered a non-contributory social pension for the elderly – is being implemented by the Ministry of East African Community, Labour and Social Protection. This is an enhancement of a similar previous cash transfer programme initiated in 2012 targeted at individuals aged above 65 and living in extreme poverty. The social scheme will cost taxpayers Ksh. 30 billion annually.

The elderly citizens will also get free medical cover through the state run National Hospital Insurance Fund (NHIF).

A total of 566,000 people have so far applied to be included in the government cash transfer programme for those aged 70 and above, Ms Mochache has said.

President Uhuru Kenyatta has said his administration will pay special attention to four key sectors he believes will drive Kenya’s economic agenda during his second term in office. The youth, he has said, will be at the centre of the four-pillar plan, dubbed “The Big Four Agenda”, which includes food security, affordable housing, manufacturing

News around town

Achieving Vision 2030 social protection goalsand affordable healthcare. The first payment for the new entrants under the social protection programme for the elderly began on May 23, 2018.

Deputy President William Ruto says the Jubilee government has in the last four years invested heavily in social protection programmes with a focus on improving safety net services.

“The government has spent Ksh. 66 billion on the cash transfer programmes for needy and vulnerable populations, including orphans and senior citizens, allocating more funds every year across the board,” said Mr Ruto in May this year. “In the current financial year, the government has allocated a total amount of Ksh. 25 billion to cash transfer programmes,” he added.

According to UNICEF Kenya representative, Werner Schultink, the cash transfer programme offers much needed social protection to the vulnerable elderly in a country where access to basic quality services such as health care, education, clean water and sanitation, is often a luxury for many people.

“It gets worse if they live in urban areas where inflation is unforgiving in a period when the social setup of relying on relatives is collapsing,” said Nairobi based analyst Ian Nyoro.

Better health care has seen life expectancy in the country rise even as the elderly lack pension plans, say experts.

The World Health Organisation (WHO) report of 2015 estimates life expectancy in Kenya to be 63 years. When the cash transfer programme for those aged above 65 was introduced in 2012, the plan was to ensure that the country’s senior citizens do not slide into extreme poverty, hunger and consequent premature death.

To qualify for the cash transfer scheme, senior citizens ought to have been born before 1947 and have valid first generation identification cards.

“It is envisioned that providing the bi-monthly, regular and unconditional cash transfers to the 70 years and above senior citizens, will provide them with the much needed social support required to access social services in health and other amenities,” reads Kenya’s ministry of social protection website.

The government currently supports four unconditional cash transfer programmes including older persons cash transfers, hunger safety net programme, orphans and vulnerable children and persons with severe disabilities.

To register as beneficiaries under the plan, the older persons must visit the County and Sub-county offices of the Department for Children Services and Department of Social Services. It is here that their details, including nominated caregivers, national identity numbers, mobile phone numbers and details of their village elders are captured as part of the registration process.


Special Report

The success story of Tanzania’s social security

Tanzanian workers’ funds are being loaned to the government and joint ventures

with private enterprises thanks to a new law assented to last June by President John Pombe Magufuli.

The Public Service Social Security (PSSS) Act 2018 effectively collapsed five existing pension schemes into two; one for public service sector workers and the other for private sector workers.

The government said merging of the pension schemes would reduce operational costs as well as streamline pension payments to the country’s pensioners. President Magufuli sanctioned the bill saying that the entities were so many yet they were offering the same services and benefits to workers.

Upon ascendancy to power, President Magufuli stopped the use of pension funds in real estate developments and urged them to invest in industries saying this would create jobs as well as bring positive changes to the people in terms of enterprises.

As a result, the National Social Security Fund (NSSF) invested its funds in a number of projects namely; the Morogoro sugar and

textile factory, a flour milling business in Mwanza, a cement factory in Mbeya and a sugar factory in Kagera. The funds have since started providing cheap and available funds for use by the insuring public for development.

Tanzania established its first pension scheme, the Government Employees Provident Fund (GEPF), in 1942. It mainly served senior officials then working for the colonial government and was closely followed by the 1944 Local Authorities Provident Fund (LAPF) that was meant to serve low cadre workers.

The National Provident Fund (NPF) came into force in 1964, followed by the Parastatals Provident Fund (PPF) in 1978 and the Public Service Pensions Fund (PSPF) in 1999. Other voluntary schemes were also established to serve Tanzania’s 2.3 million working population.

On November 17, 2017, a bill was tabled in Parliament seeking to merge the pension funds that were then too small to fund any meaningful project due to low capitalisation. President Magufuli vouched for the bill saying it would help to fast-track Tanzania’s dream to fully industrialise and becoming a middle-

income country by 2025.

Trade Union Congress of Tanzania (TUCTA) has also thrown its weight behind the law, saying workers’ funds should be safeguarded by fewer and transparent bodies that have a nationwide presence.

TUCTA’s Secretary General Dr. Yahya Msigwa said savings made should be passed on to members in higher pension payments and faster processing of pensions.

Speaking on the impending merger, Social Security Regulatory Authority chief Irene Isack said she expected services to improve over time as confusion brought about by the numerous schemes was addressed. This would see recruitment drives conducted across Tanzania by one entity that had nationwide reach as compared to the smaller outfits that only had offices in key towns.

With the new law, all public sector workers have been reassured that all their funds will be managed by the Public Service Social Security Fund (PSSSF), covering about 700,000 workers. All private sector employees as well as voluntary schemes have all been absorbed by NSSF, which will now serve 1.6


Special Report

million workers.

These developments in Tanzania are very much unlike Kenya’s scenario where a bid to merge some pension schemes has faced legal challenges despite all agreeing that a larger pension scheme is better and stronger for public good.

The poor management of some schemes and legal hurdles have been some of the reasons why merger of pension schemes has been opposed in Kenya.

Currently, there are efforts to create one pension scheme for all county government workers in Kenya, with a stakeholder’s bill already in Parliament to this effect. It remains to be seen whether the proposed mergers will eventually happen.

Following the merger of pension schemes, leaders in the industry see an opportunity for the pension schemes to imparting entrepreneurial skills in workers while still in employment to enable them start income generating projects that will help them enjoy an active life and earn a decent income even after retirement.

The unification of the funds also creates a new opportunity for fund managers to formulate a pensions’ calculation formula that brings all workers to an even platform unlike before when some paid lower monthly pensions while others paid more.

The new bodies are also tasked with formulating a pension indexation that will see pension payable increase year on year instead of the current stagnant flat-based module.

Tanzania’s system sees an employee contribute 5 per cent of their earnings while their employer contributes 15 per cent. These funds can be accessed after attaining 55 years on voluntary retirement or after 60 years.

In case of death, the departed workers’ immediate family earns a survivor’s benefit as well as an unemployment benefit, with more benefits planned as the new bodies take shape.

Kenya’s new law allowing use of pension funds on public projects couldalign the sector with the region’s best practice where citizens fund the country’s development instead of heavy reliance on foreign loans that come with hefty interest rates as well as stiff conditions.


Service to All

Social security refers to measures or programmes that promote the welfare of the population and protects individuals against economic and social distress, especially after retirement. Many social security programmes are modeled around a system that pays monthly benefits to replace part of the earnings that are lost when a worker who has paid into the programme becomes disabled, retired, or dies.

National social security in Kenya is in the form of the National Social Security Fund (NSSF) and the National Hospital Insurance Fund (NHIF). The two schemes are mandatory for all employers and employees. Self-employed individuals may also subscribe to the schemes. Under the schemes, members are able to access: retirement or age benefits, withdrawal benefits, survivor’s benefits, invalidity benefits, funeral grants and healthcare.

Here are the 10 key things you need to know about social security:

1. Is social security regulated by law?Provision of social security in Kenya is regulated under several laws including the National Social Security Fund Act, the National Health Insurance Fund Act and the Retirement Benefits Act.

2. What is the difference between social security and pension?While pensions are typically workplace retirement plans in which employers and employees contribute to a pool of funds on behalf of employees, social security is a function of the national government and funded through payroll taxes collected from employees and the companies they work for. The law requires all employers to register with the schemes and remit statutory contributions on a monthly basis.

3. What are the benefits of social security?The governing laws prescribe the benefits of social security schemes to include but not be limited to: age benefits, survivor’s benefit, invalidity benefit, withdrawal benefit, emigration grant and other benefits.

4. How does the social security system work?The government administers the NSSF and the NHIF. In addition, there are private retirement benefits schemes governed by the Retirement Benefits Act, 1997 through which private employers and their employees contribute towards retirement. Retirement schemes invest their pooled funds in order to grow them. They then pay their members a lump sum or regular partial payments. These payments include the contributions as well as interest earned from investment. The NHIF pays health care bills for its members, whether in full or in part.

5. Is cash transfer to the elderly in Kenya a form of social security?Yes. These cash transfers help the old and other vulnerable citizens pay for or access basic needs such as food and health care.

6. Is Social Security just for retired workers? No. Social security has a wider scope beyond retirees that includes disabled workers and their dependants, survivors such as widows, widowers and children who have lost one or both parents.

7. At what age does one start collecting social security benefits? Workers are eligible to receive retirement benefits from the age of 55 years, but benefits are greater if you wait until you ultimately retire from regular paid employment at age 60. Widows, widowers,

10 things you need to know about social security

surviving children, the disabled and children of the disabled can start collecting earlier. For health, one can access benefits after a set number of days after they start making monthly contributions.

8. Is a retirement benefits scheme a form of social security?Yes. A retirement benefits scheme is any scheme or arrangement (other than a contract for life assurance), whether established by a written law or by any other instrument, under which persons are entitled to benefits in the form of payments. Such payments are determined by age, length of service and amount of earnings or otherwise and are payable primarily upon retirement, death, termination of service or upon the occurrence of such other event as may be specified.

9. When someone dies, how does the Social Security stakeholders know? Information and reports of beneficiary deaths generally come from family members and other government agencies. You should notify the relevant authorities as soon as possible when a person dies. The rules provide that on death, the payable benefits shall be paid to the nominated beneficiary. If the deceased had not named a beneficiary, the trustees shall determine the distribution of the benefits to the dependants of the deceased member.

10. Can you receive social security benefits if you still work?Yes, you can be employed and receive social security benefits. If you are older than your full retirement age, you can work as much as you would like after receiving full benefits. If you are below full retirement age but eligible for some amount of benefits, payments will be paid based on a calculation.


LAPFUND staff celebrated the month of October by joining the Dyslexia

Organization of Kenya (DOK) for a hike up Ngong’ Hills. The hike was part of a campaign to raise awareness about dyslexia, a learning difficulty condition. The hike took the participants up three of the eight hills

Spearheaded by the corporate social responsibility committee, LAPFUND raised Ksh. 500,000, which was given to Dyslexia Organization of Kenya to help them to facilitate an inclusive environment that accommodates people with dyslexia through creating awareness and knowledge sharing.

Dyslexia is a specific learning difficulty characterized by difficulty in reading as well as poor spelling and decoding abilities among children. According to DOK, early diagnosis and intervention is important in helping to prevent and reverse many of the problems experienced by an individual with dyslexia.The Dyslexia Organization of Kenya was started in 2011 when parents and teachers of dyslexic children realized the knowledge

gap that existed in the country. Its objectives are: To raise public awareness about dyslexia/specific learning differences; to provide screening, assessment and intervention service for individuals at risk of dyslexia and/or specific learning difficulties; to empower teachers through skills development; and to provide support for parents and teachers. Among other services, DOK offers training and workshops for parents teachers and other stakeholders, a specific teacher training course in order to equip teachers with skills for handling children with dyslexia as well as a mentorship programme. They also run Rare Gem Talent School, which caters for children with the condition.

The hike was part of LAPFUND’s CSR Policy and the requirements of the staff Performance Contracting for 2018/2019.

LAPFUND introduced its corporate social responsibility policy as part of its vision to recognize and help improve the quality of life and economic vitality of the communities in

Climbing heights for the Dyslexic

which it conducts business is in, for the best interest of the company, patrons, employees and the industry.

“We strive to show our appreciation to the communities that have made us a market leader,” said Ms. Cecilia Njoroge, a member of the corporate social responsibility committee.

Service to All


An overview of LAPFUND over the years

Your Money

1960Year LAPFUND was established under the law of Kenya, The Local Authorities Provident Fund Act, CAP 272.

50,000members

have chosen LAPFUND as their preferred voluntary retirement benefit scheme.

2,500 sports kits

that LAPFUND has provided to County Assemblies, County Governments, water companies for the KICOSA, CASA and WASCA games.

Over 4,000 sanitary towels

LAPFUND has distributed to all girls who are candidates in both primary and secondary schools.

15,000 indigenous trees planted and maintained by LAPFUND as part of its commitment to conserve water catchment areas across Kenya.

25 County governments LAPFUND co-sponsored to support socio-economic initiatives.


Health

Kenyans who have retired and those approaching retirement tend to be the

highest claimers of medical schemes for the simple reason that they are the most likely to have health issues.

While the expectation, and indeed the wise thing to do, is to continue your medical scheme membership after retirement, financial pressures make this impossible for many people. Fewer than 10 per cent of Kenyans can maintain their lifestyle post-retirement, and medical scheme membership is normally one of the first casualties. Many pensioners end up relying on family and friends for their health.

According to the Ministry of Health, non-communicable and chronic diseases, which are often associated with older age groups, are still responsible for over 55 per cent of deaths in Kenya. Case in point being hypertension complications, which are responsible for close to 100,000 deaths in Kenya every year.

A recent study found that Kenyans in retirement use up to 25 per cent of their financial resources on ever rising medical expenses, leaving barely enough for other basic needs. More than 80 per cent of the pensioners surveyed expressed concern over the lack of adequate medical insurance to cater for the increasing risk of poor health in old age.

It is for this reason that the Retirement Benefits Authority (RBA) earlier this year came up with draft guidelines for the setup of

a Post-Retirement Medical Fund (PRMF). This Fund will see retirees access better healthcare in hospitals of their choice for chronic, pre-existing and high-risk conditions.

The draft PRMF guidelines have gone through a stakeholder consultation process, been approved by relevant authorities and are now awaiting gazettement.

Regulations 14 and 19 of the ‘Occupational Retirement Benefits’ allows a contributor to undertake additional voluntary contributions for funding the post-retirement medical fund, which will be accessed at retirement. It also allows the member to transfer a portion of their retirement funds to a post-retirement medical fund. All contributions shall vest in the member immediately.

As the industry awaits the gazettment of the guidelines, schemes must pose and answer some critical questions to ensure success of the fund.

First, will there be a need for new trustees to manage the fund? Can the current trustees satisfactorily do the job? This is an important element because fund managers are integral in providing strategic direction, which will be vital. For instance, once in effect, the development of an investment policy within three years of inception shall be required and thus, the fund managers must steer this process effectively.

Second, would a review of service providers require on-boarding of new ones or maintenance of the current ones?

Focus on post-retirement health cover

Finally, should PRMF funds be segregated from the main scheme funds? In my opinion they should be and as such, administration of PRMF within the scheme framework should be clearly defined and implemented.

It will be a welcome relief for pensioners when the PRMF kicks off since funds shall be accessed through a medical cover provider at normal retirement. Upon exit from employment before normal retirement, funds can be deferred, transferred or paid according to the scheme rules. On the other hand, upon death, a member’s benefits shall be paid to the beneficiaries in accordance to the scheme rules.

Members will also have the added benefit of transferring 10 per cent or the accrued benefits from additional voluntary contributions (AVCs) from the main scheme to the post-retirement medical fund to enhance their cover.

If a pensioner continues with his medical membership with no break in cover at retirement, the medical scheme will not place additional restrictions on the member like late joiner penalties, waiting periods and exclusion if a pensioner is joining for the first time.

Overall, the set up of a the post-retirement medical fund is welcome and timely since it will ensure Kenya’s older people, who need adequate medical treatment the most, are provided with the best care possible in their sunset years.

This article is a contribution by Ms. Janet Rotich


How to

If you asked any ordinary Kenyan worker today when they would like to retire, the

answer would probably be a number lower than the normal retirement age of 60.

While most workers will not have the chance, or choice to retire early, your decision of when to retire and collect your social security benefits can affect your retirement for many years to come.

For many retirees, retirement benefits are their only source of fixed income. As retirement approaches, many people start thinking about when they should apply for these benefits. In Kenya, full retirement benefits are available at the normal retirement age of 60.

While no single age or method is appropriate for everyone when it comes to claiming social security benefits, some of the tactics discussed below can be employed to optimize your benefits 1. Work until full retirement age…or

beyondSocial security benefits are a safety net for those relished retirement years where a fixed income is hard to come by for the simple reason that you are not eligible to work or because you just want to slow down, spend some quality time with the grandchildren or travel the world.

Retiring early can be tempting, and some people choose to start taking their social security benefits at the age of 50, which is the earliest age you can do so. However, it might be a good idea to maximize your benefits by working until you attain full retirement age.

If possible, working past your retirement age ensures you don’t need to tap into the social security benefits until much later. If you enjoy the work that you do, and it is something that you can do until at least age 70, then delaying benefits is an obvious and profitable option.

2. Consider your overall financial resources and health status Some Kenyans are today investing in financial literacy and throughout their working years end up accumulating a good amount of savings, enrolling in a pension fund, starting business or generally making

How tomaximize your social security benefits

sound financial decisions that ensure they retire with a decent sum of money.

If you have financial resources that will enable you to cover your living expenses for a few years, then delaying receipt of social security benefits can make a big difference in your monthly benefits later on when you sure need them.

Similarly, if you are in excellent health overall, you can continue to work/run your business, which will sustain you beyond retirement. Conversely, if you have a condition that is expected to shorten your life, it makes sense to begin collecting benefits early to cater for medical and other expenses.

3. Avoid some basic pitfallsWhen is the last time you checked that your records at the retirement benefits scheme are accurate and up to date? Has your employer been remitting the deductions as mandated by the law? Are your next of kin details correct?

It is easy to assume that retirement benefits scheme records are accurate, but if they are not, you could miss benefits you paid for, or wait longer to get them. Don’t wait until you’re retired to review your social security benefits. Instead, check each year to make sure your records are accurate.

Another basic mistake people make is to rely on family and friends for advice. There could be an exception of one or two who are experienced in the subject, but many would not be able to give sound recommendations because they don’t know your personal financial situation. In most cases, you are better off in the hands of a financial advisor with apt knowledge on the social security and retirement benefits sector.

Finding ways to maximize your social security benefits can be more than just a useful strategy for achieving a more comfortable retirement, it can actually be a key one.

Consider starting this when you are in your 40s or 50s since this is when you have the time and the up-to-date information available to make an intelligent decision.


In the spirit of Customer Service Week 2018,

LAPFUND staff members took time to appreciate our members across the

country whom we showed that we will always have an attitude of gratitude.

LAPFUND team members who participated in the 2018 Kenya Inter-Counties Sports Cultural Associacion (KICOSCA) Games in Kisii County between August 12th – 18 where they interacted with members and promoted the brand.


LAPFUND sponsored several counties netball and

football teams during the 2018 County Assemblies Sports Association (CASA Games) that were held at the Kasarani Stadium in

Nairobi.

LAPFUND staff members are strong believers in working together toward a common vision as it was illustrated during the 2018 team building session.


State of the Nation

Africa is a continent on the move, whose promise of economic growth, enterprise

development and increased trade offers constant attraction to investor keen to be part of the continents growth story.

Numerous policies have been developed across the continent in a quest to midwife these dreams and it is refreshing that policy makers are now alive to the fact that for people to be truly developed then their social well-being must take a higher position on the priority list.

Deliberate efforts by the state and the private sector to reduce poverty and vulnerability by promoting efficient labour markets will go a long way in reducing economic and social risks such as unemployment, exclusion, sickness, disability and old age.

It is however worrying that Africa is home to a large population that does not have access to adequate health care with the lowest, and in some cases non-existent, social security and retirement benefits coverage in the world. According to the International Labour Organization, 45 per cent of total health expenditure in Kenya is out-of-pocket payments. In East Africa, coverage by statutory social security schemes is quite

limited and largely confined to workers in the formal economy and their families, leaving vast populations exposed.

For a youthful country like Kenya, where more that 80 per cent of its population are under the age of 35, with a median age of just 19, there are great demographic benefits to be gained. However, in the years to come, this population will age and the cost of social security will rise, leaving many families to bear the heavy load of social care in the absence of robust social insurance and protections systems.

The social security system in Kenya has in recent times seen increased attention with the coming of the devolved system of governance. The cash transfer to vulnerable individuals stands out as a key development in this area, but it continues to compete with other priority areas of the government during budgeting. This poses a great challenge to its continued sustainability and efficiency.At LAPFUND, we believe that we are best positioned to plug some of the gaps that still exist in catering to the social well-being of workers across the 47 counties. We are already doing this as we not only cater for our 50,000 members but also offer thought leadership and best practice in the

management of retirement schemes in Kenya and the East African region.

Over the years, LAPFUND has grown its fund value to over Ksh. 31 billion by investing in diversified asset classes under the time tested guidance of its management team. And while we are proud of the ground that LAPFUND has covered so far, we are well aware of the opportunities that still abound in securing our people’s future.

Living up to the mantra of ‘leave no one behind,” at LAPFUND we put a lot of effort in affording our members a wide variety of secured retirement products that speak to the individual’s unique needs.

Prudent management of contributors funds must be observed if any scheme is to achieve its goals. Strong boards of directors and trustees that articulate the vision of the organization, and decisive executive committees that lead with integrity and a deep understanding of the industry are key to ensuring the demographic benefits of a youthful population are not eroded by poor social security planning. This article is a contribution by Mr. David Koross, the Chief Executive Officer, LAPFUND

Social security for Africa’s young population: Looking to the future


State of the Nation


Interview withWinnie Chemutai

Leadership

1. How long have you been with LAPFUND?I joined LAPFUND last year as the Human Resources Officer, which means my role is that of talent acquisition. However, I have been in the industry for over five years.

2. How do you go about selection of human resources to ensure that LAPFUND has capable staff to achieve its mandate?The first step is to acquire the best talent in the market. Once that is done, we ensure continuous development of talent by providing learning and training opportunities. In this way, LAPFUND ends up with competitive staff capable of achieving their set objectives and mandate.

3. What makes LAPFUND the best place to work in Kenya?As an employer, LAPFUND is genuinely concerned with the welfare of its staff. It offers great benefits, encourages work-life balance, has clear career paths, embraces diversity, and the staff receive great support from top management. LAPFUND’s management goes above and beyond their mandate to see to it that employees are well equipped with the skills and knowledge they need to execute their roles successfully. LAPFUND also encourages innovative ideas from staff, which pushes staff to continuously do better.

4. What is that one thing you would like LAPFUND members to know about the Human Resources Department?Human capital is actually one of the biggest assets that an organisation can have, and through the Human Resources Department, we ensure that we have competent and motivated staff capable of serving all our stakeholders efficiently. LAPFUND members should be comfortable in the knowledge that this department will always ensure that their funds are in the hands of the most capable and honest staff in the industry.

5. What would you term as your highlight in serving LAPFUND and its member? Offering excellent customer service to members. This excellence has seen LAPFUND attain recognition and win various awards, including Company of the Year Awards (COYA) in Leadership Management, Financial Management and Customer Orientation and Marketing.


We are guided by our core values:

Customer FocusTeamwork

Continuous ImprovementProfessionalism

Integrity


In Contact

Every child is born with an immense potential to grow and develop. This

potential can only be fully realized through a proper education foundation.

The quest to provide quality education for pre-primary pupils in Kilifi County has always been a key driver in improving the county’s education standards.

The child’s total well-being and development both emotionally and intellectually is the foundation to quality education. For this reason, the County Government has invested heavily on its pre-primary education programs.

From the introduction of free pre-primary education to the construction of Modern Early Childhood Development Centers (ECDE), the County Government of Kilifi has made it a priority in ensuring that, “All children realize their full potential in life.”

Under the new constitution, County Governments are tasked with the responsibility of providing pre-primary education, village polytechnics, home craft centers and childcare facilities.

The County Directorate of Pre – Primary Education is charged with the mandate of: - Establishing Institutional framework

for Development and Management of Pre-Primary Education and Training while at the same time Enhancing Pre-Primary Education Quality and Standards.

The department has covered substantive milestones in the development of infrastructure since devolution.

When the County Government took over the management of Early Childhood Development Education, there was absolutely no system. There were very few nursery classrooms hence the county had to start from scratch.

This is one of the sectors that had been forgotten by successive national governments. There were 79,789 nursery school going children who lacked access to proper learning amenities in 2012.

The county had to start from scratch building new classes to improve access and retention and creating a conducive learning environment for the children of Kilifi. In total 2285 classes needed to be built by the county government to sustain the huge population of nursery school going children.

In areas such as Ganze, Magarini and Kaloleni constituencies which were highly marginalised, the schools were battling challenges ranging from low enrollment

numbers to lack of basic infrastructural facilities such as classrooms, desks and lack of stationery including text books, exercise books, pencils etc.

For a basic learning institution, students had to contend to learning under harsh conditions, such as learning under trees, sitting on stones or logs or writing on the earth using their fingers.

Despite the challenges that the county education sector has faced, there has been a sharp contrast from what the county government found in 2013 and now.

Overall, the county government has constructed more than 807 ECD classrooms in all parts of Kilifi County and will continue to do so every year.

Out of this, 222 classrooms are complete and operational while 585 are at different stages of completion.

Most students in areas such as Bamba, Ganze, Jaribuni and Sokoke in Ganze sub-county, others such as Adu, Magarini, Gongoni, Marafa and Sabaki in Magarini sub-county can now take pride of learning in a secure and conducive environment free from the harsh conditions they were used to.

Education: Focus on Kilifi County


In Contact

For instance, in Ganze sub-county the county government has seen the construction of more than 40 ECD centers in all the four wards. This is besides the four model ECD centres that can hold 150 pupils each.

The county has constructed at least one model ECD centre in each of the 35 wards in Kilifi.

Governor, Amason Kingi’s administration in 2015 took the noble initiative to relieve parents from the burden of paying school fees following the introduction of free pre-primary education. This has been made possible through the hiring of more than 700 ECD caregivers for the nursery children.

The initiative to waive school fees in public nursery schools has been a focal point towards improving the enrollment rate in the county.

Initially when the county took over, the number of pupils in ECD stood at 79,789. The enrollment has since increased to 124,279 pupils in all the seven sub-counties of Kilifi, meaning at least 3550 classes are needed to house the growing population.

The county has also introduced a free school milk feeding programme that is being rolled out in all the 799 ECD centers under the management of the county government.

This programme has seen pupils from KG 1 up to KG 3 receive milk to keep them in school, considering most of the pupils in the County come from needy backgrounds.

The programme helped improve and boost the children’s nutrition and has also created a conducive learning environment for the children.

To further enhance the quality of ECD education, the County government has established a resource centre at Fumbini offering certificate and diploma courses in Early Childhood Development.

Already the first batch of students has been admitted. The centre is expected to churn 300 graduates yearly.

When the County Government took over the management of Vocational Training Centers, there were only 20 youth polytechnics of

which seven were not operational.

The County Government has been able to construct 16 new centres and revived the seven polytechnics that were nonoperational. By January 2018 the county expects to have 36 centres accross the county.

The vision of the County Government is to ensure at least each Ward has a modern youth polytechnic to impact skills to the youth of Kilifi.

The county has also been providing scholarships to needy but bright student in the county from secondary, college to university level. Every year, the county government releases KSh 10 million to all the 35 wards that go towards the scholarship kitty. So far more than 371,000 students have benefited from the initiative which has cost over 1 Billion since its inception in 2013 This article is a contribution by Mr. Steven Konde Mumba, the Communication Officer at The County Government of Kilifi

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It is that time of the year again when everyone is looking ahead. If you are feeling

extraordinarily reflective, you may be looking many years ahead. As far as retirement.

Retirement can be a rewarding phase of one’s life. However, a successful, happy retirement does not just happen. It takes planning and continual evaluation. Thinking about retirement in advance can help in understanding the retirement process and in gaining a sense of control over the future.

Planning however should not be a reserve of the individual alone. The state ought to provide an enabling environment coupled with strong regulation that makes retirement planning convenient, easy and rewarding.

Earlier in the year, The National Treasury reported that the total number of retirees in the civil service alone would rise from 19,300 in the financial year 2017/18 to 19,800 in the year 2018/19 and further to 20,300 in 2019/20.

This at a time when the World Health Organization has said that Kenyans are living longer than they did 20 years ago. That combined with the ongoing population boom in means pressures on the state to provide for the elderly will likely only intensify.

This therefore means that retirement planning must be systematic, take a long-term view and have ability to provide income during old age. The goal should not be mere survival, but social inclusion and preservation of human dignity.

So how should stakeholders prepare for the future of retirement planning and social securities? Here are three considerations to keep in mind:

1. Financial EducationFirst, consistent public education and communication campaigns must be employed to build the public’s financial literacy. Financial education is growing rapidly in developed countries due to deliberate efforts by stakeholders and Kenya should not exempted.

A saving for retirement culture is largely absent in African countries due to the traditional systems of old age supported by children and lack of knowledge on savings options. This is evidenced by the fact that

Future

The future of social security and retirement planning

only 15% of Kenyans were in any form of pension arrangement by 2009.

Financial literacy plays a critical role in influencing a savings behavior and member participation in pension schemes. In addition, its helps in the reduction of debt loads, accumulation and management of wealth. Therefore, stakeholders must endeavor to equip the public with the information and knowledge that will enable them make informed decisions.

The changing social culture where parents can no longer rely on their children to support them in old age requires apt financial education campaigns that will help people avoid the pitfalls and trap of retiring to poverty. Such campaigns must also emphasize that establishing an investment strategy for retirement must begin at the earliest opportunity.

2. Better Management of FundsPrudent management of funds and schemes will become a critical factor in ensuring members get the maximum output. This calls for continually managing risk and keeping track of market fluctuations. Like all good businesses, fund managers will need strategically plan by managing debt to maximize returns, and ensure they have enough cash on hand to pay out at any time.

Recently, the training of trustees of retirement funds in Kenya has been made, and should continue to be not only compulsory but also rigorous. This will enhance the capacity of Boards of Trustees, resulting in better-managed schemes. An additional layer of better management would be for trustees of pension schemes engaging the services of a professional consultant to draft policies to guide the investment manager on the investment strategy of the scheme.

Most importantly, the industry regulator, the Retirement Benefits Authority (RBA) has adopted a risk-based approach to supervision in line with financial services regulation. As RBA continues working on guidelines to enhance accountability, transparency and overall management of schemes, trustees must establish their own investment strategies that meet set objectives.


Future

Research- and report-related engagement, training and monitoring of performance indicators are some of the requisite tools that will aid in improved management. Trustees should also have a risk mitigation policy in place. The various inherent risks should be identified through consultative forums to identify them and mitigate their effects.

There have also been changes aimed at strengthening the independence of Boards of Trustees, which will all work towards ensuring safeguards to funds that are premised on better management. Trustees should also have a trustee liability cover to reduce their risk in case of any litigation issues, which may arise.

3. Technology AdoptionWe are living in the information age. As such, the retirement and social security sector cannot shy away from innovation and the need to embrace technology. It is understandable that many times, the challenges facing the sector can feel daunting due to the nature of the business. Nonetheless, adapting technological solutions makes any organization prepared

for what may lie ahead while providing simple solutions to the “monumental’ problems.

For instance, pension funds have to think very strategically, and putting an emphasis on forecasting is critical. Technology can help pension funds efficiently assess the impact of speculative pipeline deployment to compete for funds against other equity types. The ability to make quick strategic decisions about how to deploy billions will be critical in addressing the need to optimize members’ resources. In addition, the right software solution can help pension funds prepare for the future. How so?

Pension funds need access to technology that can easily analyze volatility and sensitivity to capital market fluctuations. When thinking about the future of pension funds, questions such as, “what if interest rates increase?” must be addressed proactively.

Being able to assess these questions easily and with the help of technological solutions can help funds ensure that they

are properly set up with diversification and less risk exposure. If these happens, clients’ retirement funds can therefore be properly secured.

While the outlook of retirement planning and social security might be bright, some challenges still exist. One of the biggest challenge lies in how to expand the market through supportive legal frameworks. A strong and enabling policy and regulatory framework is needed to ensure both the contributors and fund managers are empowered to support each other.

Availability of responsible investment products or securities to allow trustees to deliberately increase short- and long-term investment performance will also be a challenge that the sector will face in future but it is surely surmountable.

It is inevitable that retirement planning will evolve but these are some of things if we all do will make our retirement better than the ones our grandparents lived.


We strive to be the leading scheme in Kenya providing

secured retirement


S ocial security programs are increasing in number around the world. Actually, global

levels of social security protection are at an all-time high, and coverage continues to increase.

Initially instituted only in European and Latin American countries in the early 20th century, social security plans can now be found in developed and developing nations worldwide.

This is partly due to strong political commitment, excellence in administration and an increasingly discerning population that is demanding better retirement policies from leaders. As such, social security is now transforming lives and shaping societies in all regions of the world.

However, as is the case in the United States, social security systems in many of these countries have funding problems.

Social security may also have unintended effects on economic and demographic behavior in a country. Many of these behaviors are only now beginning to be understood.

The National Institute on Aging (NIA) in the United States of America, a country that has one of the most, advanced social security systems has proposed research be done on their social security system so as to better understand its effects and possible means of reforms if any.

With such detailed planning and intricate approach to social security, there are many lessons that Kenya not only from the United States but also across the world. Here is a selection of four countries and the lessons their systems can teach us.

ChileThe lesson we can learn from Chile’s system is a strong policy and regulation framework that is implemented to the letter in order support social security systems.

In Chile, the law requires that all covered workers place 10 per cent of monthly earnings in a savings account with a highly regulated intermediary that manages a single fund and provides survivors and disability insurance.

Workers pay a commission charge, in addition to the mandatory 10 per cent, to finance this insurance and to cover the costs and profits of the intermediaries. On becoming eligible to

receive benefits, a worker can choose between a sequence of phased withdrawals and a real annuity.

The Chilean policy framework sores highly for defending the country’s social security system from political risk and on the functioning of the capital market. However, more could be done when it comes to provision of insurance and managing administrative costs.

The Chilean social security system, which is privatized, runs on a “very high cost” though it is better than the inefficient system that existed before.

NorwayNorway was voted number 1 in the 2016 Natixis Global Retirement Index, a data-driven ranking of retirement security in 43 countries across the world. This because of several smart changes the country has made to its retirement system.

Norway has a government-provided retirement pension along the lines of Social Security. However, in 2011, the country did something clever that went beyond it.

Norway overhauled its private-sector pension system known as AFP to encourage older Norwegians to stay employed.

This meant that Norwegians would not be penalized if they opted to keep working while earning retirement benefits. Furthermore, the size of the pension now grows each year a worker delays filing to claim it, until age 75.

The result has been that the percentage of AFP-eligible workers who claimed benefits

at 62 rose from 30 per cent to 50 per cent, but the fraction who continued working after claiming at 62 shot up by about 13 per cent.

In other words, the traditional connection between the decision to file for a pension and to stop working was severed. This is what Norway calls “un-retirement”. The lesson here is that though the desire to file early for retirement money is powerful, that does not mean people want to leave the job market when they get the cash.

Canada Canada has taught us that if possible, providing several safety nets for your retired population is key in ensuring their welfare is addressed. This translates to happier and more productive pensioners.

Canada has multiple social security schemes. The first is the Canadian Pension Plan which is payable at 60 and is paid out of contributions made during a person’s working lifetime. In addition, every legal resident or citizen that has lived in Canada for 10 years receives Old Age Security benefits paid out by the government rather than contributions once they reach 65 years of age. Full Old Age Security payments are paid out to residents who have spent 40 years in Canada and may or may not include a Guaranteed Income Supplement – a third facet of the Canadian retirement benefit systems that aims to equalize senior’s incomes.

Learning from othersSocial security is more than a fundamental human right. Social security also helps to address a wide array of socio-economic challenges, and society ends up being more resilient as a result. This is especially so when coverage of the population is adequate and comprehensive.

While the outlook for social security in Africa, Kenya included, is a positive one, it is evident that responding to current and future challenges requires the further development and sharing of innovations, good practices and solutions from social security advanced nations.

As reforms continue, such lessons must be taken into effect to ensure that these sought after reforms are in tandem with the global trends, best practice and emerging issues.

Global trends in social security programs

Social security is now

transforming lives and shaping

societies in all regions of the

world.


Visit any of our offices around the country to get a membership form. Alternatively, you can visit our website www.lapfund.or.ke and download the membership form.

Once completed, submit the form(s) and the necessary documents to the nearest LAPFUND office for processing and await notification on the success of your application. LAPFUND will issue members with membership cards.

Contact us on:LAPFUND 8th Flr, JKUAT TOWERS (Former ICEA Building), Kenyatta Ave, P.O. Box 79592 - 00200, Nairobi, Kenya. Tel.: +254 709 805 000 / +254 709 805 100Email Address: [email protected]

r

Employee

of Gross Salary12%

Employer

of Gross Salary15%

MEMBERSHIPLAPFUNDto

is open to all employees of the 47 county governments as well as affiliated institutions such as Water And Sewerage Companies, private companies, parastatals and individuals in the informal sector.

Statutory contributions This is a benefit for those employed underpermanent terms. The contribution rates areas follows:

How to join1. Members to fill LAPF/1 Admission Form

Attach a copy of your National ID and Passport photograph.

2. Attach copy of National ID of your next of kin.

Voluntary contributions Designed to enable contributors enhancetheir retirement package by makingadditional contributions.

1. Contributors enjoy tax relief on contributions of up to KES. 20,000 at a point of deduction (i.e. less PAYE).

2. Contributors enjoy tax free income and tax relief on benefit. It’s open to both existing Members and Non Members

How to join1. Members to fill LAPF/1 Admission Form and

LAPF/9 Voluntary Form2. Attach a copy of your National ID and

Passport photograph.3. Attach copy of National ID of your next of

kin.4. Members are able to view their statements

and account balances on the LAPFUND website

Details on how to become a LAPFUND member.

Preaching to the choir


We, the LAPFUND Board of Directors, Management and all staff members wish all our customers, partners and sponsors a Merry Christmas and a Prosperous New Year 2019.

Merry Christmas


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the social security edition · for informal employees, and lack of a policy ... president uhuru...

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