Factors affecting retirees’ consumption pattern in Nairobi County, Kenya

Submitted in partial fulfilment of the requirements for the degree of Master in Public Policy and Management at Strathmore University.Globally, the elderly comprise 10.4% of the global population and is projected to increase to about 21.7% by 2050 with about 80% living in developing economies. Old age poverty have several secondary consequences. Owing to HIV/AIDS pandemic, the older assume more responsibility for caring orphaned and vulnerable grandchildren. As they age, the elderly are more vulnerable to disability, suffer from high incidences of sickness and lack financial resources to access medical care. Shielding the elderly from the risk of poverty is a major challenge to any developing economy. Since 1948 when the Universal Declaration of Human Rights recognized income security in old age as a fundamental human right, the rich economies have invested heavily in providing income security for older people, while coverage of formal pension schemes has remained low in poor economies. Public pension programs have major impact on old age poverty. Pensioners’ consumption pattern also play a critical role in mitigating against poverty at old age. The objectives of the study were to determine the factors that affect the consumption pattern of the retirees and to identify the effect of lump sum pension, monthly pension, income from invested pension, education level and time taken to disburse the pension funds on the consumption patterns of retirees. The study findings are expected to contribute to knowledge on pension utilization; inform social protection policy; provide useful insights to the retirees on how to best manage their consumption patterns; and useful to researchers, academicians and policy makers by contributing to the body of knowledge on retirees’ consumption patterns for the purpose of shaping policy and practice. This study sampled 105 respondents, employed non-experimental research design and sought to investigate factors that influence retirees’ consumption pattern in Nairobi County, Kenya. The study considered Friedman’s permanent income hypothesis model and Keynes absolute income hypothesis. The study used structured and semi-structured questionnaires to collect the primary data. The study revealed that whereas education level has a positive influence, Lump sum and monthly pension have negative influence on retirees’ consumption pattern. However, monthly income from invested pension and the time taken to disburse pension have no influence on retirees’ consumption pattern. The study recommends full implementation of policy on pension payment that is compulsory to all employers, revision of guidelines to ensure schemes nurture a savings culture and increase contributions to reasonable levels, a robust and comprehensive retirement planning package, and adequate pre-retirement information to help retirees make informed choices