The Problem We Stopped Noticing
The curve every scheme celebrates — savings climb, then plateau at retirement. The dashes are the problem: the income runs out before the member does.
A member retires after 30 years of diligent contributions. The statement shows a lump sum larger than any single amount they have ever held. It feels like wealth.
Yet within a handful of years — school fees, a business venture, extended family obligations, rising medical costs — the money is gone, and two decades of retirement still stretch ahead.
This story plays out quietly across East Africa every month. It exposes an uncomfortable truth: as an industry, we have spent decades perfecting accumulation — how to get money into schemes — while under-investing in decumulation, the harder question of how those savings translate into a secure, lifelong income. That is the adequacy gap, and it is becoming the defining challenge of our retirement system.
Enrolment, contribution rates, and investment returns are visible, measurable, and easy to celebrate. Adequacy is none of these. A scheme can report strong returns and full compliance while its members still retire into poverty.
What 'Good' Looks Like
Closing the gap is less about new products and more about better defaults and honest communication. Practical steps include:
Designing the "at retirement" moment deliberately. Schemes that offer a structured pathway — a blend of annuity for guaranteed baseline income and phased drawdown for flexibility — protect members better than a single cash cheque. Example: pairing a modest annuity that covers essential monthly costs with a managed drawdown for discretionary spending.
Projecting income, not balances. Showing a member their likely monthly income in retirement — rather than a headline pot value — reframes the conversation and drives better contribution and preservation decisions well before retirement.
Strengthening asset-liability thinking. As a scheme's membership ages, the investment strategy should tilt toward matching future income needs, not simply chasing return.
Making preservation the path of least resistance. Defaulting members toward preserving or transferring benefits when they change employers, rather than cashing out, quietly compounds into far better outcomes.
“The metric that matters most to a retiree — will this income last as long as I do? — rarely appears on a trustee dashboard.”
— Niloyd Associates Retirement Benefits Practice
A Shared Responsibility
No single party can close the adequacy gap alone.
Trustees must treat retirement income adequacy — not just returns and compliance — as a core governance objective.
Insurers have room to innovate on flexible, fairly priced annuity and longevity solutions suited to local realities.
Investment professionals can build strategies that manage sequencing and longevity risk through the decumulation phase, not only the accumulation one.
Regulators can shape defaults, preservation rules, and disclosure standards that nudge the whole system toward durable outcomes.
Business leaders can recognise that employee financial security is a productivity and retention issue, not merely a statutory obligation.
Key insights
Longevity
Members are living longer than the assumptions many schemes were designed around. A pot sized for 12 years of retirement is a liability when someone lives for 25.
Leakage and early access
When members withdraw or fully access benefits on changing jobs, the compounding engine is switched off at exactly the wrong moment. Preservation, not contribution rates, is often the real bottleneck to adequacy.
The lump-sum default and sequencing risk
A large cash payout invites spending, poor reinvestment, and exposure to a bad market year early in retirement — a shock from which a drawn-down portfolio may never recover.
Conclusion
The schemes that thrive over the next decade will be those that stop asking only "how much have we saved?" and start asking "how well will our members live?" Niloyd Associates supports trustees, insurers, and sponsors with retirement income adequacy assessments, decumulation strategy design, and governance advisory across Kenya and East Africa.
Work with us
Have a question about this topic? Our advisors are available to discuss specific mandates and regulatory questions.
