Why Kenyans are cashing out retirement savings earlier
Business
By
Macharia Kamau
| Jul 10, 2026
The amount of money Kenyans cashed out from retirement savings surged 10 per cent last year pointing to difficulties in retention of formal employment jobs due to economic hardships.
Some of those who have been laid off claim to be using the money to survive the storm in a move that threatens to expose them to poverty in retirement years.
A new report by the Retirement Benefits Authority (RBA) estimates that more than half of the benefits paid by pension schemes last year was made to individuals accessing benefits before reaching their retirement age. The leavers, as they are referred to in the RBA report, are individuals who withdrew their savings for old age after they exited their organisations due to resignations, redundancy or company closures.
The RBA report notes that the leavers constituted the largest disbursement category, withdrawing Sh74.57 billion or 53 per cent of the Sh141.76 billion worth of payments made by the pension sector players.
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The amount that Kenyans accessed before reaching retirement age increased by 10 per cent from Sh67.79 billion in 2024. This has been on the rise from Sh52.7 billion in 2021.
“Total benefit payments rose toSh141.76 billion, heavily driven by early withdrawals. Payouts to leavers—individuals accessing their pension benefits before reaching official retirement age—constituted the single largest disbursement category at Sh74.57 billion,” said RBA, adding that benefit payments have been on rise since 2021 when they stood at Sh102.01 billion and that “this upward trajectory was largely driven by payouts to leavers.”
During that period, normal retirement benefits accounted for the second-largest share, totaling Sh44.57 billion distributed to members who had formally reached the official retirement age. Other payments were to families and dependents of deceased members who received Sh18.23 billion in death benefits, while employees forced out of the workforce due to medical incapacitation were paid Sh4.39 billion under ill-health retirement provisions.
The significant withdrawal could be a reflection of the economic pressures forcing workers to use their accumulated pensions as a financial safety net but also presents major challenges for the government’s push to grow national savings.
On leaving employment due to job loss or other factors, the retirement benefit laws allow employees to access 75 per cent of their retirement savings – 100 per cent of their contribution and 50 per cent of the employer’s matching contribution – before retirement age.
Many employees choose to withdraw the cash rather than leaving it deferred or transferring it to a new scheme. For some, it is an immediate survival mechanism to meet needs such as food, rent and school fees before finding another job while others cash out to start businesses.
RBA has in the recent past been pushing for policy reforms to restrict early access, arguing that when employees deplete retirement savings early, it exposes them to old age poverty. The authority has proposed a review of the RBA Act to restrict access to a maximum of 30 per cent of their accrued retirement benefits before attaining the age of 50.