Inside the Retirement Benefits Authority’s proposed lifetime medical insurance cover for Kenyan retirees

For many Kenyans, retirement marks the end of a regular salary but not the end of financial responsibilities. Medical bills, chronic illnesses and the rising cost of healthcare can quickly turn years of pension savings into money spent on treatment.

The challenge is particularly acute for retirees who lose employer-sponsored medical insurance upon leaving employment and must find alternative ways to finance healthcare at a time when their regular income has declined.

Now, a new regulatory framework is seeking to change how Kenyans prepare for medical expenses in old age, allowing workers to set aside part of their retirement benefits specifically for healthcare.

The Retirement Benefits (Post-Retirement Medical Funds) Regulations, 2026, published under Legal Notice No. 146, establish a framework for dedicated medical funds designed to help workers finance healthcare after retirement.

The framework, developed through the National Treasury and the Retirement Benefits Authority (RBA), provides an option for pension scheme members to ring-fence part of their retirement benefits for medical expenses rather than relying entirely on their remaining pension income.

For retirees who have watched medical costs erode their savings, the changes could offer a way to plan for healthcare before leaving employment.

Under the new regulations, members retiring from eligible pension schemes may transfer up to 50 per cent of their accrued retirement benefits into a registered post-retirement medical fund.

Workers who are still active members of pension schemes may transfer up to 10 per cent of their accrued benefits before commutation, while 100 per cent of additional voluntary contributions can be transferred to a post-retirement medical fund.

The funds can be used to purchase private medical insurance, finance medical coverage arranged through the fund, reimburse eligible out-of-pocket medical expenses or purchase a medical annuity, depending on the applicable arrangements.

The framework also provides for the transfer of these options to nominated beneficiaries or dependants in the event of a member’s death.

Unlike ordinary pension income, which must support a retiree’s daily living expenses alongside other financial obligations, a dedicated medical fund is intended to preserve money specifically for healthcare.

This separation could help retirees plan for treatment costs without repeatedly dipping into the money they need for food, housing, utilities and other essential expenses.

However, transferring money into a medical fund is optional under the framework, and the amount available for treatment will depend on the contributions made, investment performance and the medical arrangements selected.

Beyond dedicated medical savings, the wider policy debate concerns whether Kenyans can secure health insurance that remains available throughout retirement without exhausting their pension funds.

The Insurance Regulatory Authority (IRA) and the Retirement Benefits Authority have a role in shaping the retirement and insurance landscape, with the broader objective of improving financial protection against healthcare costs in old age.

A lifetime health insurance arrangement would represent a different approach from relying solely on a finite pool of personal savings. Depending on the product design, benefits and premiums, insurance can spread the financial risk of medical expenses rather than requiring an individual to meet every bill from a personal fund.

For retirees, however, the critical questions include how premiums will be paid, whether cover can be maintained as medical costs rise, what conditions and treatments will be covered, and whether benefits will continue for life.

The 2026 post-retirement medical fund regulations establish a framework for dedicated healthcare savings and several ways of financing medical benefits. They should not, on their own, be interpreted as guaranteeing every retiree a lifetime insurance policy.

Any proposed lifetime insurance initiative would therefore need to be assessed separately, including its eligibility requirements, premiums, benefit limits, exclusions and funding arrangements.

The new framework also places greater emphasis on preparing for healthcare costs during a person’s working years rather than waiting until retirement to find medical cover.

Under the regulations, post-retirement medical funds may be established as stand-alone funds or as dedicated medical sub-funds within existing occupational pension schemes. The arrangements are intended to provide a structured way for members to accumulate money for future medical needs.

This approach could be particularly relevant to workers who currently depend on employer-provided medical insurance and have not made separate arrangements for healthcare after leaving employment.

By allocating part of their retirement benefits to medical expenses, workers may be better positioned to meet future treatment costs without relying entirely on their monthly pension or drawing down their savings whenever illness strikes.

Yet the success of the framework will depend on awareness among workers, the ability of pension schemes to establish compliant funds, effective oversight and whether the amounts saved will be sufficient to meet healthcare needs over potentially decades of retirement.

For Kenyans approaching retirement, the central issue is not simply how much money they accumulate during their working years but how much of it remains available after years of paying for healthcare.

A retiree who faces repeated hospital visits or expensive treatment may find that even a substantial pension is insufficient to cover both daily living costs and medical expenses over the long term.

Dedicated medical funds offer one way to address this challenge by separating healthcare savings from other retirement benefits. Insurance-based solutions could offer another route, depending on their design and affordability.

But neither approach removes the need for clear rules on coverage, sustainable financing and consumer protection.

The new regulations mark a step towards making healthcare an explicit part of retirement planning. The broader test will be whether these arrangements can deliver meaningful and lasting protection to ordinary Kenyan retirees, including those with modest pension savings.