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Healthcare poses biggest financial fear for retirees

By Steve Umidha
Friday, November 6th, 2020
The elderly.
In summary
    • In the Association of Kenya Insurers’ 2019 Kenya Retirement Preparedness Survey, majority of respondents admitted to feeling unprepared for retirement. Only 29 per cent of respondents stated that they felt comfortable with their retirement plans.
    • Insurers Sanlam Life and Minet Kenya have launched a new a post-retirement medical insurance cover for consumers aged 55 years and above, dubbed RetireMed. It will administer both individual and group schemes, with entry ages between 18 and 59 years.
    • Surveys show that Kenyans in retirement use up to a quarter of their financial resources on financing the rising medical expenses, leaving barely enough for other basic needs.

Steve Umidha @UmidhaSteve

In Kenya today, it only takes a single medical issue to drain your bank account and force you to put major life events on hold – it is even worse when you are retired.

Healthcare costs have ballooned in the last decade, eating up wages and greater percentages of household incomes – and Kenyans who were saving for retirement during that time are not inescapably prepared for that cost and their account balances show it.

Statistics show that less than 10 per cent of Kenyan population retire financially independent with one of the reasons being cited for the sorry state being that when saving for retirement, most people underestimate how much they will have to pay for medical expenses during their retirement years.

Association of Kenya Insurers (AKI) says that majority of the respondents to the association’s Kenya Retirement Preparedness Survey 2019 confirmed that they were not ready for retirement – with only 29 per cent feeling they are well prepared for retirement.

Other reasons for low preparedness are low income, lack of saving discipline, lack of financial literacy and investment ideas or options. 

It is now feared that the situation could worsen in the years ahead owing to Kenya’s life expectancy rate which has been increasing consistently since 2015, an indicator that the number of retirees in the country is on the rise.

Speaking during the launch of a post-retirement insurance product by Sanlam Life and Minet Kenya dubbed RetireMed, Retirement Benefits Authority CEO Nzomo Mutuku said the product would help address challenges faced by retirees in accessing quality healthcare during their golden years. 

“The flexibility of RetireMed to accommodate any individual including the informal workers is in line with the RBA Strategic Plan 2019-2024 which focuses on bringing more individuals in the informal sector under a retirement benefits scheme. “It also plays a key role in securing savings mobilised through the pensions sector,” he added.

Medical insurance

The product is designed to assist Kenyans save for their medical expenses and will provide medical insurance coverage for consumers aged 55 years and above.

Non-banking financial services consultancy, Liaison Group became the country’s first company to inaugurate a post-retirement pension medical scheme that allows clients to enjoy medical cover in their retirement. 

Suluhu Umbrella Scheme allows members to access their medical cover through their pension and income drawdown in one platform.

Owing to the expected surge in the number of retiring Kenyans – with less savings to back their healthcare concerns into retirement, RBA last year released Prudential Guidelines to help manage post-retirement Medical Funds.

They will guide members, trustees and service providers on the conceptualization and running of Post-Retirement Medical Funds (PRMFs).

Under the scheme, a member can contribute for retirement and a medical plan, and on attaining retirement age, the funds will be used to secure a retirement benefit while the medical fund caters for their medical cover fully on retirement.

A trend analysis report shows that health expenditure had grown to Sh73.2 billion by 2016 while the percentage of admissions for people over 65 years stood at 34 per cent in 2013 compared to 25 per cent a decade ago.

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