Pension crisis as 60,000 set to retire

Pensioners in court to press for their dues. FILE PHOTO | NMG 

By BONFACE OTIENO
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Summary

• Treasury data show that more than 10 per cent or 59,400 of the half a million public sector workers will retire by June 2020, amid fears that the State will be forced to retain some workers beyond the retirement age of 60 due to a skills shortage.
• The most affected staff are in the senior management levels and technical cadres with critical skills and competencies.
• The time bomb has continued to tick despite the decision nine years ago to raise the retirement age from 55 years to 60 years.
• The move was meant to slow down the number of retirees entering the pension pool and offer the government some headroom to set up the contributory pension scheme, which has been shelved on several occasions.

The public service faces a jobs and pension crisis as nearly 60, 000 civil servants are set to retire within three years.

Treasury data show that more than 10 per cent or 59,400 of the half a million public sector workers will retire by June 2020, amid fears that the State will be forced to retain some workers beyond the retirement age of 60 due to a skills shortage.

READ: Public pension crisis as 20,000 government staff retire this year

The most affected staff are in the senior management levels and technical cadres with critical skills and competencies.

“The total number of retirees is projected to rise from 19, 300 in the financial year 2017/18 to 19, 800 in the year 2018/19 and further to 20, 300 in 2019/20,” said the Treasury.

The rising number of retirees in Kenya’s ageing civils service will lift the public pension bill by a fifth to Sh86.2 billion in the coming fiscal year starting July and Sh104 billion in year ending June, 2020.

Part of the pension time bomb build-up has been attributed to the government’s failure to push through necessary reforms, including kick-starting the long awaited contributory pension scheme.

The time bomb has continued to tick despite the decision nine years ago to raise the retirement age from 55 years to 60 years.

The move was meant to slow down the number of retirees entering the pension pool and offer the government some headroom to set up the contributory pension scheme, which has been shelved on several occasions.

The government has failed to move the current scheme to a defined contribution plan, a reform that has been put on hold since 2013 and which would have eased pressure on taxpayers in the long term.

Under the scheme, civil servants were to contribute two per cent of their salary to the retirement scheme in the first year, five per cent in the second and 7.5 per cent from the third year onwards.

The Government, as the employer, was to match every worker’s monthly contribution with another 15 per cent of the salary.

The State plans to introduce management trainee plan this year to fast-track graduates into executive roles, trigger promotions and review blanket ban of fresh hiring to ease effects of the ageing workforce.

This would have an effect on the ballooning wage bill.

Public servants’ salaries consumed half of all revenues and were impeding spending on development projects in Kenya, a country mired in poverty where the unemployment rate stands at about 40 per cent.

More workers beyond 60 years will also be placed on contract, says the Public Service Commission (PSC).

The retention of the old blood has been blamed on a lack of a mentoring programme in public service for junior staff to succeed their seniors in executive roles.

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