State cuts pension pay by 17.5bn
Denis Gitau  |  Jun 2, 2020

The Treasury’s pension plan has been revised downwards by a whopping Sh17.5 billion. This is a huge blow to retirees’ livelihood as they are already grappling with delayed processing of benefits.

Pensions and gratuities expenditure has fallen to Sh86.99 billion from the original Sh104.89 billion which had been budgeted for according to the last exchequer statistics that cover 10 months through April 2020.

However, retirees’ payroll hit a record of Sh71.84 billion in the period between July 2019 and April 2020.

This is a 36.44 percent growth over the same period last year. This is largely because of a rapidly aging workforce in the public service sector.

Taxpayers have been feeling the pinch of the increased pressure from pension payments despite the decision to raise the retirement age from 55 to 60 nine years ago.

According to Treasury secretary Ukur Yatani, the Sh14.21 billion lag in the processing of senior citizens’ benefits in the first nine months of the current fiscal year was due to slower than targeted processing of pension payments.

Part of the blame has been assigned to the Finance minister as a result of failure to implement reforms such as launching the long-overdue contributory pension scheme despite the law having been put in place in 2012.

Unlike workers in the private sector, civil servants do not contribute to their pension and as such receive their benefits from taxes.

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

Unfortunately, the fight against the Covid-19 pandemic caused focus to shift towards curbing its spread which has drained a significant portion of state resources.

The retirement scheme advocates for the contribution of 7.5 percent of civil servant’s salaries with the government matching each worker's monthly contributions at a rate of 15 percent of 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.