Apart from fresian cows, Kenyans are rewriting their retirement playbook

For decades, the image of retirement in Kenya was almost predictable.

After clocking out of formal employment, many would pack up, move back to the village, and set up a small venture, maybe buy a few Fresian cows for milk, keep some goats, or start a modest hardware shop.

Retirement was not just an end to work; it was a return to simpler rural living.

However, a new generation of retirees is rewriting the rules, driven by financial literacy, changing lifestyles, and the realities of modern life.

Today, retirement planning stretches far beyond cattle and hardware stores.

It involves Saccos, the Nairobi Securities Exchange (NSE), government securities, private pension schemes, real estate in satellite towns, and even lifestyle-driven investments such as Airbnb units or retirement communities.

This generational shift is not just cultural, it is shaped by policies, economic pressures, and lived experiences of today’s pensioners.

Shift from guaranteed benefits to personal responsibility

One of the biggest turning points in retirement planning came in 2011, when Kenya required public sector schemes to move from Defined Benefit (DB) schemes to Defined Contribution (DC) schemes, according to the Salaries and Remuneration Commission (SRC).

Under the old DB model, pensions were guaranteed by the employer, meaning workers could depend on a predictable payout.

The new DC model, however, places more responsibility on individuals: benefits depend on how much one contributes and how well the investments perform.

Public service employees must now contribute at least 7.5% of their pensionable salary, with employers adding a minimum of 15%, capped at 20%. This has introduced a culture of saving during one’s working life and encouraged voluntary top-ups.

It has also made retirees think more strategically about supplementing pensions with other investments.

What the 2024 pensioner survey reveals

While structures are in place, life after retirement is not always smooth. The 2024 Pensioner Survey, conducted by the Retirement Benefits Authority (RBA), paints a mixed picture.

The study revealed that while some enjoy financial stability and leisure, many face serious challenges.

• Dependency burden: Abig number of retirees reported supporting dependents, often adult children and grandchildren. Instead of enjoying financial freedom, many find themselves shouldering the weight of family unemployment.

• Savings adequacy: Despite saving for 30–40 years, only 41% of retirees felt their pension benefits were enough.

• Income drop: Most retirees experienced a sharp drop in income compared to their working years. This highlights the need for diversified income streams such as rental property, saccos, or securities.

• Health as a priority: Some of the respondents said good health was the most important factor in retirement, yet out-of-pocket medical costs remain high even for those with health cover.

• Social isolation: Beyond money, many retirees said they miss the social networks and connections of the workplace.

Why retirement planning has changed

Several factors explain the shift in retirement strategies among Kenyans:

1. Financial literacy: Younger workers are more exposed to financial education and digital platforms. Many are learning to invest in Saccos, NSE-listed shares, and government securities early.

2. Urbanisation and lifestyle changes: With more Kenyans building lives in cities, many choose to invest in satellite towns or retirement communities rather than simply going back to the their rural homes.

3. Healthcare concerns: Rising medical costs have made health planning just as important as financial planning. Calls for compulsory post-retirement medical funds are gaining ground.

4. Informal sector reality: With 83% of Kenyans working in the informal sector, according to the Pensioner Survey, retirement schemes need to expand to cover workers outside formal employment.

From fresians to Airbnbs: Real-life shifts

Retirement stories today often go beyond cows and kiosks. Some retirees invest gratuity in real estate developments, turning plots into rental units. Others are tapping into the hospitality boom by setting up that generate steady income.

Private pension schemes are also gaining traction, allowing individuals outside the public sector to build structured retirement savings.

Meanwhile, Saccos continue to provide a trusted avenue for both savings and affordable credit, especially among middle-class workers.