Blow to retirees as State cuts pension pay 17.5bn

The National Treasury building in Nairobi. FILE PHOTO | NMG 

By CONSTANT MUNDA
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Summary

• Expenditure on pensions and gratuities is now estimated at Sh86.99 billion from Sh104.89 billion that the Treasury had initially budgeted.
• Pension payments have continued to pile pressure on taxpayers despite a knee-jerk policy decision nine years ago to raise the retirement age in public service from 55 to 60.
• Processing of the benefits to the senior citizens for their service to the nation had lagged the Treasury’s target by Sh14.21 billion in the first nine months of the current fiscal year through March before the full-year goal was cut in April.

The Treasury has revised downwards its pension payment plan by Sh17.5 billion in yet another blow to retirees already grappling with delays in the processing of their benefits.

Expenditure on pensions and gratuities is now estimated at Sh86.99 billion from Sh104.89 billion that the Treasury had initially budgeted, latest exchequer statistics covering 10 months through April 2020 show.

Retirees’ payroll, however, still hit a record Sh71.84 billion between July 2019 and April 2020, a growth of 36.44 percent or Sh19.19 billion, compared to the same period a year ago largely because of a rapidly ageing workforce in the public service.

Pension payments have continued to pile pressure on taxpayers despite a knee-jerk policy decision nine years ago to raise the retirement age in public service from 55 to 60.

Processing of the benefits to the senior citizens for their service to the nation had lagged the Treasury’s target by Sh14.21 billion in the first nine months of the current fiscal year through March before the full-year goal was cut in April.

Treasury secretary Ukur Yatani had said in February “the shortfall…was due to slower than targeted processing of pension payments”.

Part of the pension build-up has been blamed on the Finance ministry’s failure to implement necessary reforms, including starting the long-delayed contributory pension scheme despite the law having been enacted in 2012.

Civil servants, unlike workers in the private sector, do not contribute to their pension and their benefits are paid straight from taxes.

Mr Yatani had earlier in the year pledged to gazette May 1 as the commencement date for the contributory Public Service Superannuation Scheme by enforcing the Public Service Superannuation Scheme (PSSS) Act 2012.

But this has been affected by the increased focus on the fight against the spread of the coronavirus pandemic, which has drained state resources.

Under the retirement scheme, civil servants will contribute 7.5 percent of their salary, with the government matching every worker’s monthly contribution at the rate of 15 percent of the pensionable salary.

“A member may also make voluntary addition to their contributions towards their retirement benefits in the PSSS,” Mr Yatani said in Budget Policy Statement.

“The government is also mandated to take out and maintain a life insurance policy that has disability benefits in favour of every member of the scheme. The policies must be worth a minimum of five times the member’s annual pensionable emoluments.”