State defaults on pension remittance for six months

Controller of Budget Margaret Nyakang’o. FILE PHOTO | FRANCIS NDERITU | NMG    

By BRIAN AMBANI More by this Author

A cash crunch at the National Treasury saw the government skip remitting pensions for civil servants in the six months to December 2023.

Controller of Budget Dr Margaret Nyakang’o has revealed that the government did not remit the pension for the first half of the financial year 2023/24 to the Public Service Superannuation Scheme (PSSS).

The Treasury only managed to settle arrears of Sh4.59 billion which it had skipped remitting to the PSSS between May and June 2023.

Read: Unremitted pension losses hit Sh32bn

“The government of Kenya’s contribution (as the employer) remitted to the PSSS had six-month contribution arrears, as the Sh4.59 billion remitted to PSSS was payment for May and June 2023,” said Dr Nyakang’o in a presentation to the National Assembly’s Budget and Appropriation Committee (BAC).

The government introduced the PSSS scheme in 2021 to reduce its pension burden after years of delays in putting the retirement plan in place.

Contributions to the scheme were staggered, starting from 2 percent of the gross pay of civil servants in 2021 to 5 percent in 2022 and eventually 7.5 percent in 2023.

The government contributes 15 percent of the gross pay of the workers to the scheme.

As at July 2023, the scheme had 403,421 members and a fund value of over Sh80 billion.

The cash crunch not only affected contributions to the PSSS but also the payment of pensions to retirees.

According to Dr Nyakang’o, underfunding from the exchequer meant that while the government reported that it had spent Sh82.3 billion on pensions, it had paid only Sh59.01 billion.

This is less than half the Sh189.089 billion that the Treasury has budgeted to spend on pensions and gratuities this year.

“Notably, the budget implementation of pensions and gratuities has been impacted by the downtime of the Pension Information System,” said Dr Nyakang’o.

“The Controller of Budget recommends timely funding of pension and gratuities votes and clearance of arrears on government contribution remittances to PSSS.”

Read: Pension funds allowed to ignore bond paper losses

This comes at a time when the government has found itself in a tight fix due to underperformance of revenue collection as well as growing debt repayment obligations, especially external debt which was substantially inflated by a weak shilling.

By February, the Kenya Revenue Authority (KRA) had collected Sh1.374 trillion in tax revenue, which is equivalent to 55 percent of the Sh2.495 trillion target for the full financial year ending June.

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