The government has a lot to establish before slashing the retirement age
to 55 years to avoid disorganising the currently employed who planned
to retire at 60 years. File
By Isaiah Opiyo
In Summary
Early this month, an MP hinted at drafting a Bill
that seeks to reduce the maximum retirement age from the current 60
years to 55 years as a measure to create employment for the youth.
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This revelation comes months after the Salaries and
Remuneration Commission drafted a report with, among other measures, a
recommendation to slash the maximum retirement age as a way of reducing
the ballooning wage bill. The proposal to reduce the maximum retirement
age, though noble, would turn out to be a double-edged sword.
First, as envisioned, through early retirement many
unemployed graduates or youths will get jobs. Conversely, reducing the
maximum retirement age will financially disorganise those currently in
employment who have planned to retire at the age of 60 since they will
have built up less retirement capital.
Certainly, this category of civil servants needs even more cash to last for a longer period.
Interestingly, this new shift comes after the
government in 2009 effected an increase in the retirement age for public
servants from 55 years to 60 years and announced a new contributory
public service scheme.
The drive for raising the retirement age then was
to reduce the increasing number of new pensioners, give the government
time to plan for resources to fund the new pension scheme and allow room
for introduction of a new contributory public service scheme.
The government must have adequate financial
resources to pay for pensions. But with the liquidity crunch, early
retirement may prove to be an uphill task worth postponing.
While this may prove to be a hard puzzle for policy
makers, Kenya’s situation is not unique. The Zambian government appears
to have taken the route Kenya took in 2009 when it raised the
retirement age.
In June 2013, the Zambian government proposed an
increase in the retirement age by ten years to 65 years from the
traditional 55 years, arguing that 55 years was low and that it led to
wastage of human resource.
Pundits, however, argued that with the prevailing
high rate of unemployment, the intention went beyond the reduction of
human resource wastage to enable the Zambian government restructure its
pension scheme on the backdrop of increasing life expectancy. The
government is still engaging policy makers to address the rising
concerns.
In Kenya’s case, only those who were scheduled to
retire this year at 60 will not be affected by the proposed draft Bill.
This implies that the group that follows this lot will have to either
look for other jobs to fund the deficit in their retirement savings or
risk becoming destitute when they retire with insufficient savings.
Regardless of which way the sword cuts – creating
employment opportunities for the youth or utilising the human resource
of those above 55 years – what is clear is that the case for the
reduction of the retirement age against the current unemployment rate is
overwhelming.
Nevertheless, there are certain preconditions that
need to be in place for this to deliver a win-win situation. It would
not be interesting to see retired workers become destitute due to
insufficient savings.
Conversely, it would be encouraging to provide jobs
for the youth when they are still young and active so they can also
have adequate time to plan and save for their retirement.
To strike a balance before the proposed retirement
plan is adopted, the following recommendations should be explored.
First, the government should establish the average life expectancy in
the country.
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