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UPDATE ON FINANCIAL EDUCATION CAMPAIGNS A PRESENTATION BY EDWARD ODUNDO CHIEF EXECUTIVE OFFICER MENA UPDATE ON FINANCIAL EDUCATION CAMPAIGNS A PRESENTATION BY EDWARD ODUNDO CHIEF EXECUTIVE OFFICER MENA WORKSHOP ON PRIVATE PENSION REGULATION AND SUPERVISION

AGENDA n Location of Kenya n Kenya’s Retirement Benefits Structure & Membership n Current AGENDA n Location of Kenya n Kenya’s Retirement Benefits Structure & Membership n Current status of Pensions Coverage and Replacement Rate n Attitude and Perception towards Retirement n Pension Education Campaigns n Challenges n Way Forward 2

Location: Location:

Kenya’s Retirement Benefits Structure & Membership National Social Security Fund (NSSF)-67% The Civil Service Kenya’s Retirement Benefits Structure & Membership National Social Security Fund (NSSF)-67% The Civil Service Pension Scheme – 22% §Provident Fund §Non contributory & Unfunded §Contributory & funded (both employee §Covers all service employees and employer) §Exempted from Retirement Benefits §Accounts for 28% of total industry assets Authority Supervision §Covers all employer with 1+ employees §Legislated by Act of Parliament §Regulated & Supervised by RBA Private Occupational Schemes – 11% §contributory & funded §Accounts for 70% of Industry Assets §Covers employees of the employer §Regulated & Supervised by RBA §Legally formed under trust deed § 1282 schemes (Estimated membership – 400, 000) Individual Retirement Benefits Schemes-0% §Contributory & funded §Open to all - formal & informal workers §Regulated & Supervised by Retirement Benefits Authority §Legally formed under trust deed § 20 Individual Retirement Benefits § Schemes Estimated membership 15000

Current status of Pensions Coverage and Replacement Rate Pension saving is a voluntary exercise Current status of Pensions Coverage and Replacement Rate Pension saving is a voluntary exercise and not mandatory No universal pension – Pilot cash transfer programme targeting senior citizens (over 65 years) introduced in 2009 Only 15 % of the workforce is covered (mostly in the formal sector) Plans underway to reach the more than 80 % that was not covered (informal sector ) Low replacement rates (at 20%) – people not saving enough to increase income replacement ratios at retirement

Attitude and Perception towards Retirement n The concept of retirement (to many) does not Attitude and Perception towards Retirement n The concept of retirement (to many) does not involve pension schemes– (mainly associated with savings for assets - house, land, cows etc) n Perception problem: n n Employer’s responsibility to drive the pension agenda n n Suspicion that scheme providers may collapse with members savings or may just refuse to allow them access to the savings Retirement is too far away so why worry about it now? Culture: n n Traditionally children take care of Parents/elderly Stigma associated with retirement – feared, even dreaded. Considered untrendy – avoided by the young. Society not retirement friendly

Pension Education Campaigns n RBA has adopted a Multi-faceted approach to pension education n Pension Education Campaigns n RBA has adopted a Multi-faceted approach to pension education n Some of the Education Platforms leveraged include: n Public Education campaign n Trustee Training n Retirement Planning Seminars n Open Day n Media Education n Road Shows n Trade Fairs n Financial Education School curriculum – In progress 7

Public Education Campaign: Public Education Campaign is one of the key activities undertaken by Public Education Campaign: Public Education Campaign is one of the key activities undertaken by the Authority. Three campaigns have been carried out in the past. These campaigns were aimed at: Demystifying the Pension subject Educating the public on the Role of RBA Arousing curiosity about pensions by sensitizing the public on pension matters to change perceptions and influence behavior Inculcating a saving culture in Kenyans by starting them early on the path to saving for retirement. Encourage employers to offer retirement savings programs for their employees. RBA is developing a “Call to Action” campaign that will cause Kenyans to sign up for pension plans. This campaign will be developed in partnership with media houses to influence local TV content

Public Education Campaign “The Questions Campaign” April 2009 – June 2010 Public Education Campaign “The Questions Campaign” April 2009 – June 2010

Trustee Training Seminars RBA runs a Trustee training programme targeting individual trustees at no Trustee Training Seminars RBA runs a Trustee training programme targeting individual trustees at no cost to schemes to improve scheme administration and enhance the sector’s growth through improved governance. One day curriculum covers the following topics: § The general role & Responsibilities of Trustees § Compliance requirements § The role of Trustees in Investment of retirement Benefit Scheme assets § Taxation § National Insurance Hospital Fund products § Groups exercises Majority of participants are 1 st-time participants To date, all the 1300 registered schemes have at least one trained Trustee training available to all schemes irrespective of compliance status n Development of a Trustee Training Certification Programme in collaboration with College of Insurance, Humber Center for Employee Benefits, Canada and Association of Retirement Benefits Schemes (ARBS) is in progress to be launched in June 2011

Retirement Planning Seminars § Previously Pre-retirement seminars targeted scheme members 50 years and above. Retirement Planning Seminars § Previously Pre-retirement seminars targeted scheme members 50 years and above. The seminars have since been renamed “Retirement Planning seminars” with no age limit § Objective: § § To equip members with investment and social skills to help them cope with life in retirement Key Topics: § Testimony from a retiree § Benefits § Time Management § Attitudes to retirement § Investment & Personal Financial Management § Health Issues in retirement

Challenges n Increasing coverage in an environment where Retirement Saving is voluntary n Revocation Challenges n Increasing coverage in an environment where Retirement Saving is voluntary n Revocation of the Preservation Rule has unlocked the Employers portion of benefits allowing members to withdraw 75% of their benefits before attaining retirement age n Competition from other saving options offering more attractive products i. e. Cooperative Societies, Bank Savings Accounts, Property, Equity, Investment Groups, etc n Changing the orientation of Kenyans from a spending culture to a saving culture

Way Forward n Intensify efforts to increase awareness levels on the need to save Way Forward n Intensify efforts to increase awareness levels on the need to save for retirement using: n Mass Media • Vernacular FM Radio stations with regional captive audience • TV Programming to influence content • Print Media – through a pension column n Demonstrate value for saving through a Pension plan using clear illustrations that show benefits that will be derived from long-term saving using a pension calculator n Partner with Ministry of Education to introduce financial literacy curriculum in schools to inculcate a saving culture in children at an early age to change attitude and shift orientation from that of a spending culture to a saving culture n Build Media partnerships to enlist their support to amplify messages on pension issues with a view of reaching targeted segments across the various platforms n Continue to lobby Government to make pension saving compulsory

Thank You Asante Thank you Edward Odundo, MBS Chief Executive Officer Retirement Benefits Authority Thank You Asante Thank you Edward Odundo, MBS Chief Executive Officer Retirement Benefits Authority P. O. Box 57733, Nairobi, Kenya Web: www. rba. go. ke 14