Sometimes, it happens that we don't have enough money to invest not because we aren't maximizing on what we earn, but because we're not minimizing on the "wastage" (i.e. TAX)

Consequently, i had to hit the e-books and get schooled on how to invest better. Here's what i've realized (a bit late, but better than never)...

i)Set up an individual pension plan and get up to Ksh. 20,000 tax deductible on contributions. (This i already knew.) The nice part is that i can access this amount before retirement to buy a home.

ii) Set up a home ownership savings account with e.g HFCK and there's no PAYE applied on amounts saved to a maximum of Ksh 4000 per month or Ksh 48000 per annum.

That's Ksh288,000 that the taxman won't touch!!! Not to mention the interested that compounds on this principal amount over the years.

Any other ways anyone knows that I need to know about?....

Yep, the amount does earn you interest. The level, however depends on who you're registered with and the terms of their home ownership plan.

HFCK's base rate of 7% isn't much to write home about.....

Anyone with an S&L account? I'd be interested to know what their interest rates on this look like.

Life insurance premiums tax deductible upto ksh 60,000 a year or 15% whichever is less.

@savant. What does tax deductible 20,000 mean, exactly? And if i have saved to buy a home, when i cash out, will anything bind me, to buy the home?

The insurance cover must be 10 years or longer. medical cover is only one year, so it doesn't qualify for this relief.

But you can include children's education covers etc, as long as they are at least ten years long

Taxes on pension are payable on withdrawal from the pension or when the pension is paid to the saver.
It not that taxes are not payable but they are deferred just like the 401(k)'in US

@milken so what is the advantage of all these struggles if the taxman will still come to collect his dues at a later date?

When you want to access your pension before retirement age then it is taken as savings not pension and I think that's why the clever gova has allowed people to access such a big percentage of their pension. Retirement homes will be the order of the day in 2030.

@Aguytrying Tax deductible simply means that if your Gross Income is Ks50,000 and you take out an individual pension plan of e.g. Ks10,000 then the amount of income you can be taxed reduces to Ksh40,000. The maximum allowable amount (for retirement purposes) is 20K per month. Meaning if you decide to take out an IPP for 40K p.m. then KRA will tax you on any amount above 20K.

@Impunity the detail here is that you have to be saving up towards the specific purpose e.g. home ownership, pension...etc. So no, you can't withdraw your savings to buy a mat....not unless of course you can convince KRA that your dream retirement home IS a matatu :)

To ALL. The savings avenues and incentives we're discussing are IDEAL for those who've just began working, those who currently don't have any property/home and would like to own one, those who actually want to maintain their lifestyle after retirement. Or simply those who find it hard to save!

I'm in HR when i look at the payroll and what somepeople (myself included) are paying in taxes it makes me WONDER...ignorance can indeed be VERY expensive.