New pension scheme for civil servants long overdue

Retired Teachers (1997) Group chairman Joseph Mwenja (left) and secretary Gidraph Kimatta refers to the Constitution during a past Press conference in Nakuru. The government is facing a pension time bomb. FILE 

The time bomb may be ticking much faster and closer to explosion point, but it is better for the government to fix this late than never.

It is the public service pension time bomb. And it has its roots in the fact that the government has since Independence stuck with the money gobbling defined pension scheme

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The scheme, which was common with many governments around the world but has since been discarded, has one major characteristic. Government employees who benefit from it never have to contribute a penny towards their upkeep in old age.

Instead, they take home their entire pay throughout the 30 or 35 years they work for government and upon retirement earn retirement benefits based on the last position held and salary earned during their working life.

For their employer, who is the taxpayer, this scheme of things means huge amounts of money must be set aside in the budget every year to pay for the upkeep of the retirees.

The danger here is that because the civil service keeps growing as the population grows and in turn the size of government, the number of retirees to be catered for continues to steadily rise over the years, eating deeper into public resource

In a country with very strong private pension schemes, many observers of the government’s pension predicament wonder why it has over the years failed to act with resolve to fix it.

It may well be possible that in a country where life expectancy until recently stayed below 50 years, the government found it easier to keep the defined scheme.
 




But more recently as life expectancy improved and larger numbers of civil servants retired every year, it has become a real burden.

Yet many challenges continue to dog plans to set up a contributory pension scheme for civil servants -- top among them the reluctance by the would be beneficiaries to join what amounts to taking a pay cut.

Contribution to the making of the egg nest means parting with a fraction of their salary, hence taking less home.

With the pension bill expected to hit Sh62 billion next year, Treasury secretary Henry Rotich must marshall all the energy that is needed to kick-start the contributory scheme. This is the only way we can secure the future of public workers while keeping the burden to the taxpayer at the minimum.