Saccos urged to encourage retirement savings

 
NATION CORRESPONDENT

Sacco societies should go beyond lending and deposit-taking to help their members start saving for retirement, the Retirement Benefits Authority has urged.

With traditional systems of old-age security breaking down, accomplishing a secure, comfortable retirement will be easier if one plans for their retirement, authority CEO Edward Odundo said.

“Saccos and pensions are key to our country’s development because they mobilise savings to enable us realise a savings to gross domestic product ratio of 25-28 per cent, as envisaged in the macro-economic framework underpinning the Vision 2030,” he said during Muramati Sacco Society annual general meeting at Murang’a on Friday.

“But equally important, they have a responsibility to ensure that their members have access to retirement planning to adequately prepare them for old-age by saving for their retirement.”

Mr Odundo said that the authority works with the Finance ministry to ensure tax incentives and regulations are put in place and that Kenyans take charge of their retirement planning. Both employed and self-employed people should also be allowed to have suitable retirement saving arrangement.

Muramati Sacco Society chief executive Tony Mwangi said the sacco had an interest in the Mbao Pension Plan because of its flexibility as it enables members to save for retirement by contributing at least Sh20 daily through either M-Pesa or Airtel Money. He said the sacco will have a desk dedicated to the plan in each of its 13 branches

Hope for KR pensioners as new board is unveiled

By FRANCIS MUREITHI fmureithi@ke.nationmedia.com

A new board to run the Kenya Railways Staff Retirement Benefit Scheme has been unveiled, one month after retirees demanded the sacking of directors linked to mismanagement.

The appointment of five members to the board comes in the wake of an audit report by the Retirement Benefit Authority (RBA) which revealed how the outgoing board of trustees had mismanaged billions of shillings belonging to more than 9,000 retired Kenya Railways workers.

The scheme which is one of the wealthiest in the country in terms of land assets is worth in excess of Sh20 billion.

General (rtd) Jeremiah Kianga, who is the chairman of the Board of Directors of the Kenya Railways Corporation, unveiled the new team early last month in Nairobi during a meeting held at the KRC boardroom in Nairobi.

The new board members are Mr Arthur Runyejes, Mr Johnson Mwinzi, Ms Rhoda Muriungi, Captain (rtd) Ahmed Munir Abile and Mrs Josephine Masibo who is a senior manager at Human Resource Department in the corporation.

An insider in the meeting told the Sunday Nation that one nominee declined to take over the new duties.

Pensioners will elect their nominee at the Kenya Railways Training Institute in Nairobi on April 27 to join the board.

Two other board members will come from Rift Valley Railways and the board of Kenya Railways Corporation.

The function to unveil the new board was attended by representatives from Kenya Railways Pensioners Association, the Association of Kenya Railways Retirement Association, former senior officials of Kenya Railways and women representatives .

During the meeting, General (rtd) Kianga reportedly told the pensioners that the new team was committed to ensure they will never suffer again.

“He assured us that the new team will bring in professionalism and that if we feel there is anything wrong going on at the scheme, his doors were wide opened,” said Mr Robert Azaria, the secretary general of Kenya Railways Pensioners Association who attended the meeting.

The previous nine-member board which was sent packing was chaired by Ms Beryl Odinga. Other board members were Kenya Railways Chief Executive Nduva Muli, Dr Mtana Lewa, Mr Ken Wahome, Mr Silas Gitari, Mr Lazarus Keizi, Mr Moses Njeka, Ms Priscilla Mukuria and Mr Daniel Obop.

The previous board was accused of massive irregularities including selling some properties. It had also failed to settle pension arrears dating back to 2005.

NSSF pays another Sh590m for old deal

 

Photo/FILE NSSF headquarters in Nairobi. According to Labour assistant minister Sospeter Ojaamong, inquiries at the Registrar of Companies revealed no records available for two firms that benefited from the payout by NSSF. 

By PATRICK MAYOYO pmayoyo@ke.nationmedia.com

The national pension fund has paid a construction firm Sh590 million in an out-of-court settlement.

This is the second such payment the National Social Security Fund (NSSF) has made, bringing to Sh1.4 billion the money paid since last year following arbitration.

According to documents seen by the Daily Nation, Pan African Builders and Contractors were paid the Sh590 million following arbitration arising from a dispute regarding work at the fund’s Kitisuru housing estate.

The court had awarded the company Sh662 million.

The Sh590 million was paid to four entities — Pan African Builders and Contractors Ltd, Sh305 million, Liteline Enterprises Ltd Sh20 million, Speed Wings Ltd Sh121 million and Sh143 million to Kipkorir, Titoo and Ikiara Advocates.

When contacted lawyer Donald Kipkorir said the dispute between the NSSF and Pan African Builders and Contractors Ltd (Pabco) begun in 2003 in the High Court.

It then went to arbitration before it went back to the High Court on appeal. (READ: Prominent lawyers paid millions for NSSF services)

“After arbitral proceedings in favour of Pabco, a decree was issued in favour of Pabco for Sh662 million plus costs and interest. In spite of this, Pabco agreed to accept the reduced sum of Sh590 million,” he said.

Mr Kipkorir said whoever was pushing for the case to be published in the media was ignorant of the material facts and the court and arbitral proceedings. He said Pabco constructed and handed over the project as per contract.

“Any contrary allegation is actuated by malice, falsehoods and is defamatory,” he said.

However, it has emerged that records of Liteline Enterprises Ltd and Speed Wings Ltd cannot be traced at the Registrar of Companies.

A letter from the registrar dated March 12 addressed to the Labour ministry says the two firms are not in their database.

“We refer to your letter dated March 12, 2012. The above companies/business names do not appear in our database of registered companies/businesses,” the letter says.

On March 13, Belgut MP Charles Keter raised the matter in Parliament when he asked the Minister for Labour, Mr John Munyes, to explain how the money paid to Pan African Builders and Contractors was distributed.

Labour assistant minister Sospeter Ojaamong said inquiries at the Registrar of Companies had revealed no records were available for two firms that benefited from the payout.

Mr Ojaamong told Parliament he would refer the case to the Ethics and Anti-Corruption Commission for investigations, possibly leading to the prosecution of the concerned parties.

On Thursday, an NSSF official said Pan African Builders and Contractors was paid Sh500 million for breach of contract.

“The firm was building our houses in Kitisuru but their contract was stopped and they took us to court demanding Sh600 million plus inte
 

 

''We asked for an out-of-court settlement and paid Sh500 million,” the NSSF official who did not want to be named because he is not authorised to speak to the media said.

Documents indicate that Pan African Builders and Contractors was in June 1997 awarded a tender to build 300 houses at the NSSF Kitisuru housing estate for Sh1.9 billion.

In December 2005, the company went to court seeking payment of Sh528 million as outstanding contractual claims, but following consent by both parties, the matter was referred to arbitration.

The award by Milimani Commercial Court was the result of that arbitration.

However, after further negotiations with the board of trustees, the parties agreed to a final amount of Sh590 million.

This is the second such payment to come to light. (READ: NSSF pays millions for Kanu era deals)

In the earlier one, Lugari MP Cyrus Jirongo and a construction firm owned by a Ugandan businessman were recently paid more than Sh830 million as settlement for incomplete housing projects from the Kanu administration.

According to documents seen by Nation, NSSF entered into an agreement with Mugoya Construction and Engineering and S.K. Jirongo and Sololo Outlets as settlement in two cases against the pension fund.

In one case, the fund paid Sh342 million to Uganda businessmen James Isabirye of Mugoya construction Company for a project in which the contractor was supposed to build 265 housing units on a plot owned by the fund in Karen.

In September last year, the board authorised the management of the company to negotiate with Mugoya and reach a final settlement.

Subsequently, negotiations were held and the parties agreed to settle at Sh342 million.

The Sh490 million paid to Mr Jirongo was in respect to the development of Hazina Housing Estate.

MPs Kabando wa Kabando (Mukurweini) and Nderito Murithi (Laikipia West) have demanded that NSSF explains why they withdrew the cases.

“Whilst out-of-court settlements are legal, it’s very possible that both parties colluded to withdraw the case for fear that the courts may refuse to enforce an illegality,” the MPs said.

rest.

Agency probes NSSF over Sh2.8bn scandal

 

NSSF headquarters in Nairobi. Photo/FILE 

By BENJAMIN MUINDI bmuindi@ke.nationmedia.com

In Summary

• Unit wants to find out basis on which the pension fund paid claims to firms

A government agency has launched investigations into questionable payment of Sh1.4 billion to three companies by the national pension fund and loss of Sh1.4 billion through a stock brokerage firm.

The Efficiency Monitoring Unit, which falls under the Office of the Prime Minister, said the investigations were meant to determine the basis on which the National Social Security Fund (NSSF) paid claims to three firms.

The entities paid are Mugoya Construction and Engineering Company, S.K. Jirongo/Sololo Outlets and Pan African Builders and Contractors (PABCO).

A letter from the permanent secretary in the Prime Minister’s Office, Dr Mohamed Isahakia, addressed to his Labour counterpart Beatrice Kituyi, shows that the three companies were paid Sh320 million, Sh490 million and Sh590 million, respectively.

However, NSSF acting managing trustee Tom Odongo defended the out-of-court payment of Sh590 million to PABCO, saying it had helped reduce the liabilities.

Dr Isahakia’s letter says: “In view of the foregoing, the unit has been directed to investigate and report on the authenticity, legal and commercial basis for the payments made by the NSSF to the various law firms involved in the settlement of the claims by the three companies.”

The investigations will also determine the circumstances that led to loss of Sh1.4 billion placed with the stock brokerage firm Discount Securities Exchange.

Also to be investigated are the qualifications of current trustees of the fund, and the effectiveness of the board process for evaluation of the outgoing managing trustee.

Mr Odongo denied any malpractice in the payment made to PABCO, which NSSF contracted during the Moi regime to build houses, apartments and a shopping centre in Kitisuru.

In a statement, Mr Odongo said his board, “in negotiating the matter out of court, has substantially reduced the contingent liabilities which are a burden to the members in the long-term and also obtained cost savings”. He said after completion of the work, PABCO “rendered their final accounts to the fund’s consultants” but were never settled.

PABCO then sued the fund for Sh1.3 billion, Mr Odongo added.

State officers may begin to contribute to pension fund

 

By GRIFFINS OMWENGA gomwenga@ke.nationmedia.com
Posted  Saturday, April 21  2012 at  16:33

Public servants may start contributing towards their retirement by January next year if a Bill ratified by Parliament on Wednesday receives presidential assent.

The 2012/13 Budget Policy Statement from Treasury indicates pension expenses are set to increase to Sh40 billion in the next financial year, a cost that will be borne by taxpayers.

This represents a 15 per cent increase from Sh34.8 billion last year.

Pension costs have risen by 72 per cent in the five years since the government officially raised the retirement age to 60 for public servants.

And Treasury projects these costs will surge to Sh48 million by 2015.

The World Bank-recommended ratio of pensions cost to a country’s total gross domestic product is 2.5 per cent, but Kenya is fast moving past this mark.

To curb the rise in cost, the Public Service Pensions Superannuation Scheme Bill 2012 seeks to bring about pensions reforms.

It proposes the creation of a Public Servants Superannuation Scheme that would help employees save for their retirement, weaning them off retirement stipends funded by the taxpayer.

Treasury wants to have parastatal pension funds converted into contributory schemes where public servants contribute 7.5 per cent of their basic salary while the government tops this up with a 12.5 per cent contribution.

The idea was conceived in 2005 by Treasury Permanent Secretary Joseph Kinyua, but only 20,000, or four per cent, of 500,000 employees have registered to be considered in the scheme.

Mr Michael Obonyo of the Pensions Department of the Finance ministry told the Sunday Nation the government risks reaching the point where it is unable to underwrite pension expenses unless public servants contribute towards their retirement.

Parastatal and municipal pensions world over have been at the centre of the debt crises in Europe and the United States, a situation Kenya is keen to avoid as the devolved government system begins to take shape.

Consuming tax money

Statistics indicate that pensions expenditure in Kenya is exceeded only by Education, Defence, Roads, and Health ministries in consuming tax money.

Mr Davies Kairu, a pensions expert, has urged the government to emulate the private sector where most employers and employees contribute to the pension scheme to ease the burden on the employer.

But he added that the private sector has areas it needs to improve on as of the 93,000 private schemes registered with the National Social Security Fund, only 3,000 are registered with the Retirement Benefits Authority.

The funding gap–the difference between assets and liabilities held by the NSSF–currently stands at 21 per cent of the funds, with the burden of plugging the deficit falling on taxpayers.

Data from the RBA shows that only 79 per cent of pension liabilities of parastatals are backed by tangible assets. If the President assents, the Directorate of Pensions in Treasury expects the Public Servants Superannuation Scheme to be effected next year.

RBA to act on employers who withold cash for pension funds

Dr Isaac Mulagoli the chief executive Pyrethrum Board of Kenya. Photo/FILE 

By FRANCIS MUREITHI  fmureithi@ke.nationmedia.com

The pensions regulator has called for an urgent meeting to save the Pyrethrum Board of Kenya Staff Superannuation Scheme from total collapse.

The Retirement Benefit Authority (RBA) has also promised to act against employers who fail to remit money deducted from employees to retirement schemes.

“The board of RBA has called for an urgent meeting to identify a liquidator who will take over the assets of the PBK as it has failed to show commitment to remit money to the pension scheme,” a senior RBA official told the Sunday Nation.

The official, who declined to be named as he is not authorised to speak to the press on behalf of RBA, accused PBK of not being “serious” in securing money for the retirees.

PBK pensioners Mr Thomas Nyambega and Mr Harun Tinga, who attended a meeting with RBA officials. welcomed the new move but termed it “too little too late”.

“This is what RBA should have done long time ago instead of waiting for pensioners to suffer as they watch, yet they are the custodian of the rules and regulations which govern the management of pension schemes in the country,” said Mr Tinga.

During the meeting, it emerged that PBK had submitted a remedial plan, but it was rejected by RBA.

Plan rejected

“The remedial plan submitted by PBK does not add value to the pensioners as per our agreement, and we have therefore rejected it in totality,” said RBA officials.

The official said that PBK, in a memorandum written by the board’s managing director Isaac Mulagoli, had requested RBA to give it up to 2016 to sort out its financial mess.

However, a source told the Sunday Nation that RBA has written to the board indicating its intention to appoint a liquidator to take over some of the assets belonging to PBK and dispose them of to enable the pensioners to be paid their monthly dues without any interruption.

The pensioners had threatened to stage a demonstration outside the RBA offices in Nairobi after the authority appeared to be ignoring the issue.

They cited a case where RBA, in its tribunal ruling of September 26, 2011, ordered PBK to pay the pensioners their delayed pension, but this has not been done.

“RBA has even refused to give us a copy of the ruling so that we could seek intervention from the High Court; this is tantamount to deliberately delaying the wheels of justice,” said Mr Tinga.

But an official of the RBA said the days of employers who have been delaying in remitting pension deductions are numbered.

Drive to have all employers enrol with pension schemes

 

DIANA NGILA | NATION Alexander Forbes Retirement Fund board of trustees chairman Richard Kemoli (left) with the chief executive officer in East Africa, Mr James Olubayi, at a press briefing at Intercontinental Hotel, Nairobi, before the firm’s annual general meeting. 

By MWANIKI WAHOME jwahome@ke.nationmedia.com

In Summary

• Increase the incentives to firms and individuals as country faces challenge of an ageing population, says financial services company

Financial services provider Alexander Forbes wants the government to make it mandatory for employers to register their workers in pension schemes.

Speaking during the company’s annual general meeting, managing director Sundeep Raichura also said the government should consider increasing incentives for pension schemes and individuals to build the numbers.

“We have suggested a basic universal pension to alleviate old-age poverty. We are asking the government to make it mandatory for employers with more than five workers to register with pension schemes,” he said.

He said Kenya was faced with the challenge of an ageing population, and it was important for the government to encourage more people to join pension schemes, particularly in the informal sector.

Out of an estimated 60,000 employers in the country, he said, only 1,400 had registered their workers with pension schemes.

He said pension coverage remained low in the country, with only two million out of 12 million in formal and informal employment registered, out of the national total population of 40 million.

Mr Raichura said the current incentives to pension schemes were not enough to increase the numbers, adding that the Sh20,000 deductible amount should be increased significantly as it had not been reviewed over a period of five years.

He said that in countries like Ireland, the government matched contributions by individuals to boost the number of those registered.

And in Uganda and Tanzania it is mandatory for employers to register their workers with pension schemes.

He added that with East Africa’s harmonisation of systems, Kenya should follow suit and make contribution to pension schemes mandatory.

“If left to benevolence, employers will not register workers with pension schemes. Where this has thrived it is backed by legislation. Time has come for the government to make it mandatory for employers to register their workers with pension schemes,” said a trustee member, Mr Antony Kilavi.

The Alexander Forbes Retirement Fund, established six years ago, was the first multi-employer umbrella retirement fund in East Africa.

It has grown from a membership of two employers to 85 currently, covering 19,000 workers.

If the proposal to make the pension contribution by employers mandatory is accepted by government, the fund will be among those that stand to benefit from increased membership.