Long term implications of early access to pension benefits - the case of Kenya

Abstract

In July 2009, a bill was introduced that allowed members of a pension scheme to access their contributions and 50% of their employer's contribution. This change in law resulted to increased early access of pension funds upon change of jobs by individuals in pension schemes. This study sought to determine the implications of early access of funds by members and the long-term implications it has. Data was collected on a sample of 336 individuals and analysis done on how factors such as age, job change frequency, withdrawal option, withdrawal amounts and financial education of the members affected their retirement income adequacy. The results obtained concluded that increased job frequency and the option to withdraw significantly resulted to reduced retirement income adequacy while increased financial education improves pension adequacy as an individual is able to make more informed decisions.