NAIROBI, Kenya — The government is moving ahead with plans to amend pension laws to allow early access to retirement savings, part of a strategy aimed at making pension schemes more attractive and encouraging broader participation among workers, especially in the informal sector.
Under the proposed “two-pot” pension system, workers’ retirement accounts would be split into two components.
One portion would remain locked until normal retirement age, preserving long-term retirement funds, while another portion could be tapped earlier to meet urgent needs such as medical emergencies, school fees, or small business start-ups.
The idea, advanced by the Retirement Benefits Authority (RBA) as part of proposed amendments to the Retirement Benefits Act and its regulations, is intended to address a persistent challenge in Kenya’s pension landscape: low enrollment and low savings rates.
By giving contributors some flexibility without undermining long-term security, policymakers hope more individuals will see formal pension schemes as relevant to everyday life.
Two Pot Structure to Boost Participation
Under the current law, most pension savings remain inaccessible until retirement age — typically around 60 — though members who exit formal employment before that can withdraw up to 50pc of accrued benefits in certain cases.
The two-pot system would preserve a dedicated retirement component that stays locked until retirement age, while allowing a defined portion of savings — often referred to as the “accessible pot” — to be withdrawn for short-term financial needs.
Supporters believe this could motivate informal workers to join pension schemes, as fears of permanent lock-in have long discouraged contributions.
Broader Sector Reforms in the Offing
In addition to early access provisions, the draft proposals include measures to improve pension costs and governance.
Plans under consideration would exempt survivor benefits from tax, reduce duties and value-added taxes on pension fund operations, and mandate stronger transparency and reporting standards across the industry.
The RBA has opened the proposals for public consultation forums scheduled across Kenyan towns in March 2026. Stakeholders and members of the public are invited to review and provide input on the proposed changes before they are finalized, reflecting statutory requirements for public participation in policy reform.
Making Retirement Savings More Relevant
Experts have noted that while pension assets in Kenya exceed Sh2 trillion, uptake remains low, particularly among workers in non-formal sectors.
Allowing limited early access, if paired with robust preservation safeguards, could strike a balance between encouraging contributions and protecting long-term financial security.
As the proposals advance through consultations and legislative review, pension sector players, employers, and contributors will be watching closely, given the potentially wide-ranging impact on savings behaviour and retirement readiness in Kenya.
