SRC sees pensions exceeding Sh50bn in higher pay push

Politics and policy

SRC chairperson Sarah Serem said a study conducted by the commission revealed that the public sector pension liabilities stood at Sh900 billion as at June 30, 2013. PHOTO | FILE 

By KIARIE NJOROGE, gkiarie@ke.nationmedia.com

In Summary

• The government paid Sh50 billion in pension in the year ending June 2015 and the size of payments could increase in the successive period if workers succeed in getting higher pay from the state.

Annual government pension payouts are expected to surpass Sh50 billion as more public workers push for pay increments, the Salaries and Remuneration Commission (SRC) has said.

The government paid Sh50 billion in pension in the year ending June 2015 and the size of payments could increase in the successive period if workers succeed in getting higher pay from the state.

Pension is calculated based on the basic salary at the time of retirement. The bulk of these payments are made to retired teachers, members of the disciplined forces and civil servants.

SRC chairperson Sarah Serem said a study conducted by the commission revealed that the public sector pension liabilities stood at Sh900 billion as at June 30, 2013.

“The government’s annual expenditure on pensions alone stood at Sh32 billion for the financial year 2013/14 and was projected to rise to Sh50 billion in financial year 2014/15 due to maturity of pension liabilities from new retirees,” said Ms Serem.

“This liability continues to burden the government and any further upward adjustment in salaries will further aggravate the pension liability.”
The pronouncements come at a time when teachers have gone on strike demanding a 50-60 per cent increase in their basic salary.

On Sunday, President Uhuru Kenyatta said if the teachers are paid the Sh17 billion that they are demanding, the government would have to harmonise salaries of other civil servants – an exercise that would increase the wage bill by Sh118 billion.

READ: Uhuru rules out higher pay amid calls for talks

The government has over the years paid pension from the Consolidated Fund as opposed to the private sector practice where employees contribute a portion of their salaries and the employer matches it to create a retirement fund.

Plans to create a similar retirement scheme for civil servants has been mulled for several years but is yet to be set up.

Some civil servants could still have their salaries reviewed next year, once a job evaluation exercise that the SRC is conducting is concluded.

Ms Serem said those whose jobs would be found to have been undervalued will have their salary reviewed. But those who are paid more than their job’s worth would not have their pay reduced.

“In the case where the job is undervalued, there will be a need to review the salary,” she said.

The job evaluation that covers the entire spectrum of jobs across the government is more than 50 per cent complete and will be concluded by June next year, said Ms Serem.

The government expects to spend about Sh630 billion on public sector salaries in the current fiscal year that began in July. This is about 52 per cent of all tax revenues collected.