Pension plan noble

 

 Civil servants in a procession during a past Public Service Week. The government plans to implement a contributory retirement benefits scheme for its employees on July 1 this year. FILE 

From July, civil servants will start paying for their own retirement benefits as the government moves to ease the looming pension time-bomb.

Kenya, like most African countries, runs an unfunded pension system which guarantees civil servants a lifetime pension without them contributing a single cent towards their retirement plan.

This has thrust the country into a financing fix as tens of thousands of workers, who joined the civil service from the late 1970s, reach the maximum retirement age of 60.

As a result, the State has been increasingly paying retirees and slowing down the supply of money available for social services, like health and education, for a population that has more than a half aged below 25 years.

The pension has grown from Sh20 billion in 2008 to Sh38.1 billion, making the expenditure rank the ninth behind the education, health and roads ministries on the items that take most of the government’s taxes.

Currently, there are more than 200, 000 pensioners, but this number is expected to grow by 20, 000 annually from 2015 following the expiry of the five year retirement, imposing new demand on the management of the pension system and threatening to bankrupt the state coffers.

Under the proposed scheme, State workers will contribute 7.5 per cent of their basic salary and the government is to put in 15 per cent.

Therefore, we support the idea of workers paying a portion of their salary for their retirement funds to ease the government’s growing exposure to future pension debt.