Factors influencing intent of uptake of retirement pension and provident scheme plans in the informal sector in Nairobi County
Ngomba, Paul Kitheka
When it comes to social security at retirement, the formal sector has constantly received more attention compared to the informal sector. Formal coverage stands at only twenty per cent in Kenya. The rather vibrant but fragmented Kenyan informal sector has resulted in static economic growth despite its potential as a key contributor. The 2018 Economic Survey by the Kenya National Bureau of Statistics (KNBS) shows that the Jua Kali Sector accounted for approximately eighty-three per cent of country’s total labour force and created over seven hundred and eighty-seven thousand new jobs in the period. The Jua kali sector however remains excluded, unregulated or largely underrated. Majority of the elderly in this sector have been left out of structured pension plans exposing them to poverty, health and other risks once they can no longer provide for their livelihood. The objective of this study was to determine the factors influencing intent of uptake of retirement pension and provident scheme plans in the informal sector in Nairobi County. The specific objectives were to determine the influence of the level of income, the level of education, the association links and age on uptake of retirement pension and provident scheme plans in the informal sector in Nairobi County. The study used a descriptive research design and the population was twelve million informal sector workers. The sample size employed was three hundred and eighty-four respondents and stratified random sampling was the sampling technique. Data was collected through structured questionnaires with the data subsequently being analyzed through a multiple regression model and correlation analysis. On the factor analysis it was noted that the factors explained approximately sixty five percent of the total variation based on the rotated loadings. The findings indicated that there was a positive correlation between age and intent to uptake pension and provident scheme plans. There was a strong positive correlation between association link and intent to uptake pension and provident scheme plans. There was a positive correlation between education level and their intent to uptake pension and provident scheme plans. There was a positive correlation between income level and intent to uptake pension and provident scheme plans. It was concluded that individual willingness to save in pensions plans increased with increase on age. Majority of the individuals working in informal sector considered membership in an informal sector association to be of importance. Provision of financial management education is key to ensuring that the informal sector workers invest in pension schemes and lack of sufficient earnings crippled their wish. It was recommended that irrespective of the age, NSSF and RBA should come up with sensitization strategies that ensure that employees of all age groups working within the informal sector are thoroughly educated on the importance of partaking in retirement benefits schemes. Government must come up with strategies that protect these informal sectors; which include measures such as tax reliefs, incubation programs and credit support programs, all with an aim of ensuring reliable income flows.
A Dissertation submitted in partial fulfillment of the requirement for Degree of Master of Science in Development Finance at Strathmore Business School
Provident schemes, Informal sectors, Pensions, Retirement