Public servants to pay more to pension fund

 

By SAMUEL SIRINGI

Employees in key government agencies will have to dig deeper into their pockets to fund their retirement benefits.

In a new programme to be fully implemented by July, an estimated 300,000 workers in state corporations, statutory organisations, and arms of government such as the judiciary and parliament, will carry a heavier burden in funding their contributory pension schemes.

At the same time, the share of government contributions will go down by up to 10 per cent in what is clearly aimed at cutting the ballooning pension bill of about Sh25 billion a year. The scheme has quietly been implemented by the Treasury and was expected to be adopted last month.

It should be in place by July, at the latest, according to a circular by Treasury Permanent Secretary Joseph Kinyua. There are more than 140 parastatals and semi-autonomous government agencies whose staff will be affected by the new scheme.

Treasury’s pensions public relations officer Michael Obonyo said teachers and mainstream civil servants will not immediately be affected by the new scheme since theirs were not contributory.

However, he said, they, too, may be subjected to the same scheme in future.

But Kenya National Union of Teachers acting chairman Wilson Sossion said teachers will reject such a scheme if it was ever introduced.

Mr Kinyua said individual employee contribution rates to the scheme would be half the employer’s contribution.

Where a member of staff contributes five per cent of the salary to the scheme, the employer will only offer 10 per cent of the employee’s basic salary.

In cases where the worker provides 7.5 per cent of the salary to the scheme, the employer will provide 15 per cent. Where a worker contributes 10 per cent, the employer will offer 20 per cent.

The directive will hit workers in institutions where the employer had been contributing much higher rates.

For example, Jomo Kenyatta University of Agriculture and Technology, which has been contributing 27.5 per cent compared to 2.5 per cent of staff members has reduced its contribution to 20 per cent.

The contribution of the staff will also increase to 10 per cent in line with the Treasury’s directive.

Mr Kinyua said employee contribution rate will not be less than five per cent of the pensionable emoluments.

At the Parliamentary Service Commission (PSC), staff who have been getting 22.5 per cent of employer contribution will now get 20 per cent, and increase their contribution raised to 10 per cent from 7.5 per cent.

At Moi University, teaching staff contribute seven per cent of their basic salary to the pension scheme while the institution gives out double.

Already, Daily Nation learnt, the University of Nairobi has trimmed its contribution for staff from 25 per cent to 20 per cent, and increased the staff share from 7.5 per cent to 10 per cent.

Mr Kinyua said the Treasury had been carrying out a review of all public service retirement benefits schemes to determine their ability to meet the funding levels required by the Retirement Benefits Authority (RBA).
 

The review, he said, was also to assess the potential for a “contingent liability” to the Treasury that the schemes may carry.

“The review has been necessary to ensure that there is equity in sharing the cost of funding scheme benefits between the employer and the employees,” he said.

Mr Kinyua said all defined benefit schemes should convert to defined contribution schemes not later than July 1.

Scheme members with less than five years to attain the retirement age, he said, may be given an option to stay in the defined benefit scheme or transfer to the new schemes.