Insurance Pension Plans – What are the advantages?

Saving for retirement should start as soon as possible. Image from

Here’s the ideal way to save for your future

The daily rat race is your playing field. Work hard, play hard is your mantra. Indeed, your hustle is fulfilling, but are you saving for your future as hard?

As a young person making money in the formal or informal sector, you can by all means, eat life with a big spoon and while you are at it, remember that old age is fast approaching, when you will be less productive, more sickly and left alone to cater for your own daily living or with dependents looking up to you.

Saving for retirement should start as soon as possible. Image from
Saving for retirement should start as soon as possible. Image from

It is therefore wise to consider an insurance pension plan to secure your future comfort, as you will be able to support yourself in retirement and also, to leave a legacy for your dependents. You should plan for your pension as part of your financial plan for retirement.

For most youth, the National Social Security Fund (NSSF) is mainly the first stop in considering or even learning about retirement benefits. Little thought however is given to private insurance pension plans which are more secure.
A pension is an investment avenue in which you can securely grow part of your resources for access upon retirement. Mr. Tom Gichuhi, Executive Director of the Association of Kenya Insurers (AKI), indicates that Private Pension Schemes are highly recommended as they offer guaranteed returns.

“There are many providers such as fund managers who provide pensions, and there are Insurance companies providing life products under which pension is placed as a savings product. The difference between the two is that fund managers manage segregated funds while Insurance companies manage guaranteed pension schemes.” Highlights Mr. Gichuhi.

Segregated funds means your money is invested in various avenues available, for example in real estate, stock market and T-bills, but they don’t provide a guaranteed return. Thus returns on ones savings are based on the volatility of the stock market, meaning you could have high return, zero returns or even negative ones.

This is a risk factor not experienced with the guaranteed returns offered by insurance companies. Primarily because insurance companies seek to invest in avenues with minimum risk and they always guarantee a minimum return on interest whether they make losses or profit.

As Kenya gears up to achieve vision 2030, the elderly should essentially be less of liability to the Government and society. This can be achieved through increased uptake of the robust pension plans offered by insurance companies rather than blindly waiting to hold Harambees, or for Government allowances, or even depending your children. Check out this article on to insure or not insure? Six Insurance products to consider.

AKI is pushing for more people, especially the youth working in the informal sector, to take advantage of the many benefits of having an insurance pension plan as listed here;

1. Guaranteed interest returns.

2. Your money is safe and secure is an assurance given by private insurance companies which are driven by good business practice and invest money where you will get highest returns. Also, even if insurance companies have financial problems it is very difficult for them to close shop because the statutory funds are protected by law, thus no matter what happens, pension holders will always get 100% refund.

3. Life and life related insurance are an assured product, thus there’s no tug of war when you put in a claim, because it’s not about compensation but getting back what you put in. Thus delays in payment aren’t experienced with insurance pension funds, once one files a request it is processed within 24-48hours

4. One can save part of their income as they choose, even as little as Ksh.20 a day.

5. One will be able to comfortably meet high medical expenses, manage monthly budgets and daily expenses, and to also to cater for dependents.

6. One can decide how they would like to receive payment, as a lump sum or monthly/quarterly annuities.

7. Insurance Pension Savings attract interest returns indexed to inflation. This is a liquid investment as compared to buying land for instance, which may take time and effort to dispose for quick cash. With a pension scheme, you can’t get cash strapped.

8. Unlike other insurance products such as motor and medical, one cannot make profits. But with life insurance you can make a profit, as you are allowed to buy as many covers for one life, as many times and for as much money as you want. Human life can’t be put under valuation. Some examples of life products include Personal Accident cover, Life insurance and of course pension.

9. To take advantage of the more secure and beneficial private Insurance Pension Schemes, AKI has pushed for a law that allows opting out from the NSSF to be a member of an Insurance Guaranteed Pension Scheme. As long as if one can prove they are in a superior pension scheme.

10. If one passes away, the funds can be paid out to listed beneficiaries just like a last will. And if the beneficiaries weren’t disclosed, the company will try its level best to track them through various channels such as the media before remitting the funds to the unclaimed financial assets authority as good business practice.

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Mwende Maritim is a budding freelance writer based in Nairobi, Kenya. She has always had a passion for well written content but began writing professionally in 2014. Her writing mainly covers lifestyle issues and anything to inspire people especially the teenagers she mentors.