How the Post- Retirement Medical Fund (PRMF) works

Medical expenses have been identified as one of the most significant expenses individuals face in retirement. Most retirees therefore resort to Out-of-Pocket payment and depending on their children or well-wishers to finance their medical expenses.

This is one of the main contributors to old age poverty because people are forced to either sell off their assets or borrow the funds.

The 2019 census in Kenya estimated that people aged over 60 years represent about 6 per cent of the total population, while the majority is below 30 years. With the passing of time, the ageing population is expected to increase, and this has been estimated to increase to about 10.3 per cent by 2050.  

The 2015-2016 Kenya Household Survey showed that only 14 per cent of older persons have health insurance. More than a third (34.9 -percent) of older persons who report sickness episodes do not consult a health provider.

The non-utilization of health services is significantly higher among older persons than among younger adults and children in both urban and rural areas. This can be attributed to financial barriers.

The Post Retirement Medical Fund (PRMF) seeks to address this challenge as it provides an avenue for one to save specifically towards their medical expenses in retirement. 

What is a Post Retirement Medical Fund (PRMF)

This is an arrangement that allows individuals to save funds that will specifically cover their healthcare costs when they are retired. The individual must be a member of a retirement benefits scheme registered by the Retirement Benefits Authority. 

Establishing PRMF in a Retirement Benefits Scheme

The PRMF is set up within an existing Retirement Benefits Scheme. It is important to note that the rules that govern the Retirement Benefits Scheme must be updated to provide for this Fund as outlined in the Retirement Benefits (Post-Retirement Medical Funds) Regulations, 2023.

Who is eligible to contribute to the PRMF?

All members of any retirement benefit scheme that is authorised to receive the post-retirement medical funds. This can be either Schemes set up by employers or individual retirement schemes. 

How much do you contribute towards the PRMF?

As a member, you decide the rate or amount of contribution in line with your target benefit. Contributions into the PRMF are made as additional voluntary contributions (i.e. additional to the normal pension contributions). 

What are the Tax benefits of contributing to PRMF?

The Tax Laws (Amendment) Act, 2024 which came into force in December 2024 introduced great tax benefits to encourage Kenyans to save for the Post Retirement Benefits Fund. 

Amounts saved in PRMF up to Kshs15,000 per month or Kshs180,000 per year will not attract tax. 

How can the PRMF benefits be accessed?  

• A member can choose to access their benefits in either of the following ways: -

• Retain the funds within the PRMF and withdrawing an amount annually for the purpose of purchasing an annual medical cover.

• Retain the funds within the PRMF for the purpose of offsetting any medical expenses to health care institutions. For example, paying for medical bills after admission in hospital.  

• Transfer the total accrued amount to a medical cover provider for a lifetime of health care cost coverage.

• Purchasing an annuity for the purpose of paying annual medical cover premiums.

When do the benefits become payable?

• The benefits from the PRMF are paid in the event of retirement, resignation or withdrawal and death.

• You can access your benefits to purchase medical cover upon retirement. 

• You may retain the funds within the PRMF or transfer to another post-retirement medical fund of your choice should you resign from employment before retirement. 

In the event of death, nominated beneficiaries are entitled to receive a return of a member’s fund.

Which Retirement Benefits Schemes offer PRMF? 

List of Individual Retirement Benefits Schemes providing the PRMF in the industry on the AKI Website www.akinsure.com 

The writer, Pauline Gathuri is Senior Manager, Life Insurance at AKI.