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 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.
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
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