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Retired civil servants get pension increase

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Pensioners. Growth of civil servants’ pension bill has been a headache for the government. File

Retired civil servants have received a three per cent rise on their monthly pension as the State adjusts the payout to match the rising cost of living.

Retirees will, beginning August, receive a minimum increment of Sh400 on the benefits, inflating an ever-rising pension bill that is expected to exceed Sh34.4 billion in the current financial year.

The pension bill, currently double the Sh16 billion paid out five years ago, continues to diminish the government’s ability to invest in development projects as more resources are directed to social welfare to cater for a bigger number of retirees.

“The State reviews the pension payouts to all retirees every two years to cater for the higher cost of living,” said pensions department public relations officer Michael Joseph Obonyo. In the new arrangement, pensioners previously earning less than Sh13,321 will receive an additional Sh400, while those earning more qualify for a three per cent increment.

Data shows that the cost of living shot up to 15.5 per cent in July, mainly on rising food and energy prices, which means that the ability of pensioners to maintain a certain level of living is significantly reduced.

Growth of the civil servants’ pension bill has been a headache for the government as the expenses are met with proceeds from tax revenue in the current financial year, exposing workers to a heavier burden.

But it is the dilemma on competing requirements for funding that presents the State with an immediate challenge. Last year, the State raised the retirement age of its workers to 60 years from 55 years, with the intention of setting up a contributory scheme within the five-year period of suppressed growth on the pension bill.

Even with a minimal number of retirees expected to leave the civil service till 2016, past delays in reviewing pension dues for State workers to reflect their adjusted salary payments resulted in a Sh16 billion debt pile-up that the government has decided to stagger over the period.

As a result, the pension bill for civil servants is expected to hit Sh40 billion in the next two years, meaning that more resources will be needed to meet the cost of the retirees. Should a contributory scheme be in put place, the State as an employer will also be mandated to make a contribution to the retirees’ kitty to guarantee its workers a steady income in retirement.

Contributory scheme

A contributory scheme requires that members set aside part of their monthly incomes into a pool that is invested with the intention of providing a regular stream of payments upon retirement of contributors. While the contributory scheme is yet to be established, Treasury officials have blamed the delay on lack of a regulatory framework that would enable the setting up of such a scheme.

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