Civil servants to start paying for pension from July

  

 Treasury secretary Henry Rotich during the launch of Kenya Country Partnership Strategy report in June. PHOTO | FILE

By KIARIE NJOROGE

In Summary

• 470,000 - The number of civil servants and teachers expected to contribute to the new public service pension scheme.

Civil servants will start contributing for their upkeep in retirement in July after the government allocated Sh6 billion as seed money for the public workers’ pension fund.

The contributory scheme has, since its inception in 2009, been dogged by numerous challenges that have seen its roll-out suspended more than thrice.

The decision to have the scheme running in the next financial year will see about 470,000 civil servants and teachers take a pay cut for the pension contributions. The move will also reduce taxpayers’ exposure to the burden of financing the retirement benefits of public servants that is set to hit Sh50 billion this year.

Roll-out of the contributory pension scheme is especially critical to securing long-term sustainability of government finances that are struggling under the weight of a runaway wage bill now estimated to be more than 30 per cent of the national budget.

READ: Treasury grapples with Sh800bn pension burden

Civil servants will contribute two per cent of their monthly salary to the scheme in the first year, five per cent in the second and 7.5 per cent from the third year.

The government will match the contributions with an amount equivalent to 15 per cent of every worker’s monthly pay. This is in addition to the Sh6 billion.

Under the new retirement scheme, civil servants will also benefit from a government-sponsored life insurance cover worth a minimum of five times an individual’s annual pensionable emoluments.

The Treasury has in the past blamed the absence of proper administrative offices for the delays in operation of the scheme.

In November 2013, the Treasury’s pension department appointed actuaries to help effect the evasive scheme. One of the main tasks that the experts were supposed to perform was to transfer the benefits of serving civil servants to the new scheme. This was because there existed uncertainties as to how the State would handle employees aged above 45.

It had been proposed that such workers have the option of joining the new scheme or remain in the defined pension scheme and that their benefits be computed based on the length of service and the salaries earned.

The contributory pension scheme was initially mooted in 2009 as part of a two-pronged strategy to stop a looming wage bill crisis as pension payments continue to balloon.

gkiarie@ke.nationmedia.com