The Fiscal implications of introducing a non-contributory social pension system in Kenya
Date
2018
Authors
Bwire, Lilian Adongo
Journal Title
Journal ISSN
Volume Title
Publisher
Strathmore University
Abstract
Many countries in Sub Sahara Africa are facing an imminent long term problem: inability to provide old age security to their citizens. The danger is almost certain for many of these countries as they all present the tale-tell signs; presence of a large informal sector that is not adequately covered by a default social security system, high rates of unemployment, rapidly growing aging population and inefficient social security systems. These are all red flags and unless countries in Sub Sahara Africa make rapid and sustainable reforms in their pension systems, they are all likely to face chronic poverty among the elderly. As it stands, pension coverage is already very low, access to health care and other essential services is difficult and many households are headed by an elderly person. This only serves to increase vulnerability among the elderly as they are more likely to become impoverished. After decades of pursuing a contribution based system, coverage and adequacy still remains low and insufficient. This is why researchers are advocating for a more direct approach that will cater for all the elderly, with or without a previous history of contribution. Many countries are now trying to explore the possibility of introducing direct cash transfers to the elderly, also known as universal social pensions. This paper looks at the benefits of introducing a non-contributory social pension system in Kenya and particularly focusses on the fiscal resources required to fund the program and sustain it for long term use. The data collected from previous research conducted in other developing countries that have introduced this universal social pension provided great insight on the problems that are likely to arise and the difficulties faced by policy makers in trying to implement such a program. This report's main findings are really just a discussion of how much the Kenyan government will be forced to allocate, in terms of fiscal resources, to the program and at what cost (fiscal trade-off). It also provides some suggestions for the Kenyan government in case the program were to be fully implemented. As of 2017, a pilot cash transfer program was already underway
Description
A Research project Submitted in partial fulfillment of the requirements for the degree of Bachelor of Business Science in Financial Economics at Strathmore University
Keywords
pension systems, universal social systems, developing countries