Contributory pension for State workers getting late

ACTING RBA CHIEF EXECUTIVE NZOMO MUTUKU. PHOTO | DIANA NGILA | NMG 

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Summary

• Introducing a 7.5 per cent pension deduction in the month of pay rise would guarantee minimum pain on the target group.
• That the scheme has failed to take off this month only implies that both the government and the teachers’ union have lost another golden opportunity to get it off the starting blocks.
• As late as yesterday, the Kenya National Union of Teachers (Knut) and the National Treasury were still expected to consult.

It is almost certain that the government will not meet its own timeline for the rollout of contributory pension scheme for civil servants.

By now, the payroll for July must be ready yet teachers and the Treasury are still embroiled in a hairsplitting argument as to when the scheme can take off.

Teachers maintain the Treasury never consulted them even as it settled on the July timeline.

Away from standoff, the choice of July appears to have been a practical one.

Being the first month of government’s financial programme, anything scheduled to start in July 1 is always budgeted for.

And to be sure, the Treasury had allocated Sh17.9 billion in the 2017/18 budget to cater for the government’s 7.5 per cent contribution.

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The other thing that makes July pragmatic  is that teachers — and all other categories of civil servants — are expecting pay rise of between 5.2 and 30.7 per cent.

Introducing a 7.5 per cent pension deduction in the month of pay rise would guarantee minimum pain on the target group.

That the scheme has failed to take off this month only implies that both the government and the teachers’ union have lost another golden opportunity to get it off the starting blocks.

As late as yesterday, the Kenya National Union of Teachers (Knut) and the National Treasury were still expected to consult.

We take an early opportunity to urge the two sides to come to an agreement sooner than later. The plan to rollout a contributory pension scheme for civil servants cannot wait longer.

It is estimated that more than 20,000 civil servants retire each year. 

Both the government and Knut know that pension payout from annual budgetary allocation is unsustainable.

In fact, the ballooning pension bill, now estimated at Sh61 billion annually, is a ticking time bomb that should have gone off eight years ago had the government not raised retirement age from 55 years to 60.

It is time to end the back-and-forth on the new pension plan. Pension deductions are no taxes. Civil servants who have served this country judiciously deserve a decent retirement. The only way to do so is by starting to build their retirement benefits straight away.