RBA to issue rules on micro-pension schemes

The Retirement Benefits Authority (RBA) is to issue rules on micro-pension activities in the country.

Authority research and development manager Nzomo Mutuku said the sector is plagued with inconsistencies that have contributed to low pension savings from workers in the informal sector.

“The current schemes have questionable structures and governance, resulting in diminished confidence by clients. A body is needed to regulate the activities in this sector and increase its uptake,” he said.

He spoke when he received research findings from the United States International University (USIU) in Nairobi.

The findings, dubbed Critical Success Factors for a Sustainable Micro-Pension Scheme, indicated that less than 1 per cent of workers in informal employment are saving for retirement compared to 15 per cent of those who have been employed formally.

Hurdles include the temporary nature of their employment and negative perception of financial institutions, according to Mr Amos Njuguna, an assistant professor at USIU’s Chandaria School of Business.

Kenyans have a higher chance of living to see their grandchildren than other East Africans

A trader sells mangoes in Kangemi, Nairobi. Photo/FILE 

By SAMUEL SIRINGI ssiringi@ke.nationmedia.com AND EDITH FORTUNATE efortunate@ke.nationmedia.com
Posted  Friday, August 17  2012 at  23:30

In Summary

• Investment in health, economy, social welfare and education pushes life expectancy from 58 to 62 years

Life expectancy among Kenyans has drastically gone up due to improved health and nutrition standards.

A new report released this week shows that Kenyans will live six years longer than was the case in 2010.

Life expectancy for Kenyans has shot up to 62 years from 58 last year, according to the 2012 World Population Data.

The data released by the United States of America-based Population Reference Bureau shows that Kenya’s life expectancy – the average number of years a newborn can expect to live – is now the highest in East Africa.

Kenya has overtaken Tanzania, which had the highest life expectancy of 57 years only two years ago and has remained the same.

Uganda is trailing at 53 years.

According to the data, Kenyan women, at 63, are still expected to live longer than their male counterparts.

Population and health experts were quick to attribute the changing fortunes of Kenyans to the generally improved quality of living in the last 10 years. During this time, the number of people dying from HIV-Aids related ailments has gone down while survival rates among new borns are increasing.

According to the head of population programmes at the Kenya National Bureau of Statistics, Mr Samuel Ogolla, the campaign to provide anti-retrovirals to people living with HIV/Aids has helped reduce deaths.

This has meant that people can now live with the virus for as many as 20 years, Mr Ogolla said.

The supply of the medicines has been accompanied by improved health services, which included posting nurses to health centres.

Mr Ogolla was referring to the 4,200 nurses recruited two years ago under the Economic Stimulus Programme.

Contributors

Most of them are working at the Constituency Development Fund-built health centres, also seen as one of the greatest contributors to healthy living.

“Most of our people now sleep under mosquito-treated nets, helping to reduce the number of malaria cases, which killed many more lives a few years ago,” Mr Ogolla said.

Last year, malaria killed 28,360 people, according to the Economic Survey 2012.

Mr Ogolla, a former senior official with the Kenya National Population Council, said the construction of roads since 2003 meant that sick people were able to access health centres.

“It is now easier to save a life because vehicles can access interior areas of the country, which couldn’t have been done before,” he said.

But the fact that many people are living longer will throw the country into a new crisis as it struggles to ensure quality lives for older people.

According to the 2009 Population and Housing Census, the population of people aged 60 years and above was 1.8 million.

But the country programme manager at Helpage Kenya, an organisation that works with older people, said the number was expected to shoot up following the increased quality of living.

In fact, Mr Erastus Itumbi said, the number of older people above 60 years was growing at a fast rate and now stood at more than two million.

“We are staring at a crisis,” Mr Itumbi said, adding the country was ill-prepared to handle a large number of older people.

He said the number of older people was growing much faster because the country had conquered may communicable diseases while fewer Kenyans were dying before the age of 50 following increasing use of anti-retrovirals.

“Combining disease and age sends older people to the grave fast,” Mr Itumbi said.

According to Mr Itumbi, the fact that many Kenyans were living longer than before was proof that campaigns on healthy nutrition were bearing fruit.

Although the number of Kenyans living in poverty was still high, at 46 per cent, the figure had dropped 10 percentage points from a decade ago.

That means many people were able to afford better lives.

Overall, the country’s economy, which dipped from 7.1 per cent following post-election violence in 2007/2008 has improved steadily. It grew by 4.5 per cent last year.

He said the government could still do better in ensuring that older people lived longer.

The official termed as inadequate the cash transfer of Sh2,000 a month for only 48,000 extremely poor old people.

This financial year Sh1 billion has been set aside to pay old, poor people.

The money, Mr Itumbi said, was not enough for the estimated 1.5 million old people who were never in formal employment in their working years and therefore have no pension.

MPs and lobby groups have been pushing for an increase in the amount of money to ensure that all old people are paid the stipend.

Others have also suggested that the senior citizens be issued with vouchers to access services such as electricity and water for free.

They should also be allowed access to a free and universal health care scheme

According to the Population Reference Bureau report, the fertility rate — the average number of children a woman would have assuming that current birth rates remain constant throughout her child bearing years — stands at 4.4 children, about the same as it was in 2009.

The child-bearing age for women is considered to be between 15 and 49.

The report notes that worldwide, nearly all future population growth will be in the less developed countries.

“The poorest of these countries will see the greatest percentage increase,” it says.

It is expected that developed countries as a whole will experience little or no population growth this century.

Workers, firms to remit 12pc pay to NSSF

 

NSSF building in Nairobi. Photo/FILE  Nation Media Group

By PAUL WAFULA pwafula@ke.nationmedia.com

In Summary

• The National Social Security Fund Bill, 2012 makes it mandatory for employers to top up their employees’ contributions by a similar amount, bringing the total contributions to 12 per cent of the employee’s gross pay per month.
• This is likely to further push up employer costs and put pressure on disposable incomes of employees.
• Currently the rates of contribution to the National Social Security Fund (NSSF) are capped at Sh400 a month, translating to a contribution of less than 1.2 per cent of national average earnings. 

Employees in the formal sector should prepare to start remitting at least six per cent of their gross pay to the national pension fund if a proposed law is enacted.

The National Social Security Fund Bill, 2012 makes it mandatory for employers to top up their employees’ contributions by a similar amount, bringing the total contributions to 12 per cent of the employee’s gross pay per month. (READ: State officers may begin to contribute to pension fund)

This is likely to further push up employer costs and put pressure on disposable incomes of employees.

Currently the rates of contribution to the National Social Security Fund (NSSF) are capped at Sh400 a month, translating to a contribution of less than 1.2 per cent of national average earnings. 

“The Bill provides for an increase in the level of mandatory contributions in order to ensure adequate benefits,” NSSF chairman Adan Mohamed said on Tuesday.

The increase in contributions will be over five years from the commencement date of the new pension. It will, however, voluntary for self-employed people who may pay a minimum Sh400 a month. 

The Bill, which has the backing of the Central Organisation of Trade Unions provides a window for employers who operate existing retirement benefits arrangements to opt out with the consent of their employees.

“There are just about 350,000 employees who are currently covered by employer schemes out of the millions of Kenyans employed.

"But employers running such schemes will not completely opt out to protect employees after they leave the companies as they will have to pay the minimum statutory contributions,” Mr Mohamed said.

Employees will also see an end to the lump sum payment upon retirement. This means that workers should only expect upto 30 per cent of their total amounts due upon retirement and the remaining spread out between months.

Breaking News US TOP diplomat for Africa Johnnie Carson says the duty of electing Kenyan leaders rests with its people, but 'choices have consequences'. ... HomeNews News Atwoli backs proposed pension plan

Photo | FILE Cotu secretary-general Francis Atwoli.  Nation Media Group

By NATION CORRESPONDENT

In Summary

• Cotu secretary-general Francis Atwoli said that the law proposing workers to contribute a larger amount to the National Social security Fund (NSSF) was long overdue.
• The new scheme would make it mandatory for workers, who do not belong to other pension schemes, to contribute 12 percent of their gross pay to NSSF, in a first tier arrangement.
• The 350,000 Kenyans who belong to an employer pension scheme, will pay at least six percent of their monthly earnings to NSSF, in what the board says is meant to encourage a savings culture among Kenyans.

The Central Organisation of Trade Union’s has backed the proposed Pensions Bill that will see workers contribute 12 percent of their minimum pay to a national pension scheme.

Cotu secretary-general Francis Atwoli said that the law proposing workers to contribute a larger amount to the National Social security Fund (NSSF) was long overdue.

“The Bill is pertinent as it will be responsive to the needs of workers in old age,” he said. (READ: Workers, firms to remit 12pc pay to NSSF)

Mr Atwoli was speaking after meeting NSSF’s board of Trustees, who had been collecting views from the public and stakeholders on the proposed Bill.

Workers in other schemes

The new scheme would make it mandatory for workers, who do not belong to other pension schemes, to contribute 12 percent of their gross pay to NSSF, in a first tier arrangement.

The 350,000 Kenyans who belong to an employer pension scheme, will pay at least six percent of their monthly earnings to NSSF, in what the board says is meant to encourage a savings culture among Kenyans.

Currently, more than one million NSSF contributors, give out Sh400 per month to NSSF, which is too little as it amounts to the contributor getting Sh450,000 lump sum after 30 years of contributing.

NSSF chairman Adan Mohammed, expressing optimism the proposal would work, said the new Bill would transform the national pension scheme from a provident fund to a social security fund.

State ready to buy two prime NSSF assets

 

Anthony Omuya I Nation The two prime buildings that NSSF plans to sell — View Park Towers (left) and Hazina Towers — in Nairobi’s CBD.  NATION MEDIA GROUP

By MWANIKI WAHOME jwahome@ke.nationmedia.com

In Summary

• The properties measure 203,000 square feet for View Park Towers and 95,000 square feet for Hazina Towers.
• The undeveloped plot is estimated at 1.993 acres.
• Earlier advertisement this year reportedly failed to attract good responses.
• Independent valuers estimate value the properties at between Sh14,000 and Sh15,000 per square feet of the total lettable area.
• This translates to between Sh3.5 billion and Sh5 billion for the two buildings

The government has expressed interest in buying two prime properties estimated to be worth Sh5 billion from National Social Security Fund.

The two buildings — Hazina Towers and View Park Towers — are located in Nairobi’s central business district.

NSSF acting managing trustee Tom Odongo said as a result, the workers’ pension scheme had withdrawn an advertisement for the sale to await the government’s action.

“By the time we went for open tendering, we received a letter from the Permanent Secretary for Housing expressing interest in acquiring the properties and, rather than subject them to public process, we gave the government the first priority.” he said.

The two buildings are near the Uhuru Highway-University Way roundabout.

Other property targeted for sale include an undeveloped plot next to the Israel embassy in Nairobi’s prime property area of Upper Hill.

Sale of the property was demanded by the Retirement Benefits Authority in a bid to reduce the property portfolio of the fund to the required 30 per cent.

Mr Odongo said the situation had become urgent at the beginning of the year when stock prices at the Nairobi bourse were low, but things have since improved.

At the time, the company would have scaled down the property portfolio from 29 per cent to 36 per cent.

“The reason we have surpassed this is not our own making. It’s because the shares at the NSE had a dip, which affected the portfolio balance. But we are seeing it going up, which means the property portfolio is going down,” he said.

He said the pension fund had signed a service level agreement with the investment managers to ensure they are within the limit, and received a compliance certificate in October 2011.

RBA misleading Kenyans on NSSF Bill, says COTU

By PETER OBUYA potieno@ke.nationmedia.com

In Summary

• RBA claims that the Bill also lacks stakeholder input as thus should be shelved to allow for further discussions

The Central Organization of Trade Unions (COTU) on Tuesday criticised the Retirement Benefits Authority (RBA) for “misleading” Kenyans following claims by the pensions body that NSSF Bill 2012 should be shelved to allow for more time for discussions.

RBA, which is the regulatory organ in the pensions industry was reported to have poured scorn on the ambitious Bill seeking to transform NSSF from a provident into a pension fund, by urging for caution and more time for discussions.

COTU secretary general Francis Atwoli has however dismissed as misleading further claims by RBA that the Bill also lacks stakeholder input as thus should be shelved to allow for further discussions.

“The RBA should stop playing ping pong games and engaging in reverse gears to such an important Bill that has received overwhelming consultative engagement by social partners throughout its process,” Mr Atwoli said through a statement.

Mr Atwoli claims that RBA was well represented at the taskforce that drafted the Bill and that all the proposals the pensions body wanted to be contained in the bill are included.

The NSSF Bill 2012 that is due to be tabled before parliament this October seeks to transform the country's pension fund, from a provident fund making one-off lump-sum payments, to a pension scheme offering a regular income to retirees.

But RBA are of the view that NSSF should first seek to deal with issues facing it before seeking to transform its operations.

“We need to deal with serious legacy and corporate governance issues facing the NSSF before we can even start to think of changing the law governing its operations, RBA chief executive officer Mr Edward Odundo was quoted as having said.

But Mr Atwoli says that is tantamount to underrating COTU and the Federation of Kenya Employers (FKE) who have the constitutional prerogative of protecting the interest of workers.

“FKE and COTU are the main social partners with claim to NSSF and it beats logic to learn that RBA can reduce itself to the level of a lopsided thinker and peddle rumours to undermine such a Bill,” Mr Atwoli added.

The decision to upscale NSSF is based on the fact that the current lump-sum payments run out quickly and the beneficiaries slides into destitution thus defeats the purpose of assuring income security in old age for which social protection arrangements are intended.

NSS board of trustees chairman Adan Mohamed told the media last week that the Bill is being drafted and will be tabled in Parliament in October for enactment into law.

Mr Mohamed said the Bill seeks an increase in the level of mandatory contributions in order to ensure adequate benefit. It has already won the support of Federation of Kenya Employers.

HomeFeaturesDN2 DN2 ‘I can’t work any more but boss still pays me’

 

Mr Sebastian Mbuta 

In Summary

• Nine years ago, Mr Sebastian Mbuta got a stroke while on duty and has not been able to work since. But his employer, out of compassion, has kept him on the payrollinShare

It all begun with a jerk one early Tuesday. Sebastian Mbuta, a driver at Andy Forwarders, had arrived for work in the wee hours of the morning as usual, feeling fit and ready for the day’s job.

However, on this November 11, 2003, he would later end up in a hospital bed and not be able to work again. Nonetheless, he continues to draw a monthly salary, nine years on, complete with benefits.

His employer still treats him as a worker in the company, and in addition to paying him a salary every month, offers medical cover and grants him access to loans. And when he ‘retires’, he will be paid pension.

It was about 4 a.m on the material day. Mr Mbuta was at a warehouse within the precincts of the Jomo Kenyatta International Airport, preparing his truck to be loaded with cargo.

He had just engaged the reverse gear and stepped onto the accelerator when his limbs suddenly stopped moving. His eyes also gave in.

His assistant, who had been outside directing the truck from behind, realised the unusual movements Sebastian was making and ran to his side.

It was the frantic call to his bosses’ office that might have saved Mr Mbuta. He was rushed to Aga Khan Hospital, where he was diagnosed with stroke and admitted in the ICU.

Although he was fortunate enough to move from ICU to a non-critical condition in three days, he had to remain hospitalised for another one and half months.

After that, his life became marked by trips in and out of the hospital.

For three months every day, Mbuta had to report at the hospital from his Kangundo home. He still could not speak clearly and the right side of his body was paralysed.

Since the incident, Mr Mbuta’s physical functioning was incapacitated. He had to be terminated from work.

Mbuta, now in remission, says that he had never in his wildest dreams imagined that at the untimely age of 48 years, he would be retired or be in the statistic of people with severe health problems and not being able to undertake gainful work.

“Being the only bread winner for my family, I was very worried,” Mr Mbuta says. He is father to two sons, and because his two brothers had died, six other dependants – the children of his deceased brothers – were also under his care.

Despite the comforting feeling that the staggering medical bills had been cleared by his employer, he spent a few gut wrenching nights after it had dawned on him that he would never go back to work.

Mbuta, who still visits the hospital once every month as routine, has not worked since the tragedy nine years ago. But guess what?

His former employer, decided not to stop paying his full monthly salary, and has continued to do so to date as though he is still at work.

During the critical stages of the disease, he was provided with a car and driver that chauffeured him back and forth.

In addition, he still enjoys the benefit of company sponsored medical cover to take care of his medical bills.