Conditions for Early Pension Withdrawal
- Ill Health
If a member is certified by a qualified medical practitioner as being permanently incapacitated and unable to engage in any gainful employment or occupation suited to their education, training, or experience, they may access their pension benefits before the normal retirement age. - Permanent Emigration
Members who are permanently relocating abroad and have no intention of returning to reside in Kenya may be permitted to withdraw their pension funds. This requires prior approval from the scheme trustees, which must be communicated to the Retirement Benefits Authority (RBA). - Early Retirement (Age 50 and Above)
While the standard retirement age is 60, individuals may opt for early retirement at the age of 50. However, accessing pension benefits before this age is typically not allowed unless one of the above conditions is met. - Additional Voluntary Contributions (AVCs)
Funds contributed voluntarily beyond the mandatory pension deductions may be accessed before the age of 50, subject to the scheme’s rules.
Tax Implications
Early withdrawals are generally subject to taxation. The tax rate depends on the amount withdrawn and the individual’s tax bracket. Larger withdrawals may push an individual into a higher tax bracket, resulting in a higher tax liability.
Proposed Regulatory Changes
The Retirement Benefits Authority (RBA) has proposed reforms to restrict early pension withdrawals:
- No early access for individuals under 50, except under special circumstances such as ill health or permanent emigration.
- Access to AVCs: Members who have made additional voluntary contributions may still access these funds before turning 50.
- Special Circumstances: Withdrawals may be allowed in cases of severe health challenges or permanent relocation abroad.
