The Role of Pension Schemes in Economic Development: Comparing Kenya and Singapore

Abstract

The purpose of the study was to examine the role of pension schemes in economic development by comparing Kenya and Singapore. Kenya and Singapore attained independence from the British government nearly at the same time in the year 1963. Ironically Singapore is an emerging third world economy with its GDP over seven times the Kenyan GDP. As per the 2011 statistic, Singapore’s GDP was estimated at over Kshs.20 trillion and Kenya’s 2.8 trillion. Kenya is still characterized by high rates of unemployment, high poverty rates, poor housing, poor healthcare and low of life rates expectancy and other characteristics of third world countries. The puzzle is: do pension schemes play any role in Economic Development? We  examined the role pension schemes has played in Singapore to achieve its growth and Development the lessons Kenya can learn and replicate to achieve its economic growth and development as envisaged in vision 2030. The research focused on the first pillar of pension system in both countries that is National Social Security Fund (NSSF) and Central Provident Fund (CPF) for Kenya and Singapore respectively. We used a historical design where secondary data was collected from already available sources. Major  findings and trends are that in Singapore the CPF deals with both retirement, healthcare and home ownership with contributions to the fund being mandatory and adequate and covers all Singaporeans while Kenya’s pension system characterized by low levels of contribution hence inadequate and cannot sustain retirees after retirement. We recommend that for Kenya to achieve its vision 2030 there has to be robustness in dealing with pension system because its role in economic development are immense and cannot be over emphasized as we have demonstrated in this study.

Keywords: Pension Schemes; Economic Development