Sh800m debt sinks Technical University’s pension scheme

More than 1,500 employees of Technical University of Kenya (TUK) — formerly Kenya Polytechnic — are facing a bleak future in retirement after it emerged that they have lost nearly all their pension savings to the institution.

The Retirement Benefits Authority (RBA), the pensions regulator, has indicated that it intends to dissolve the Sh900 million scheme after the university failed to remit employee deductions for months, citing financial hardships.

Even worse is the fact that the university’s property, including the eight-acre plot on which the institution sits on Nairobi’s Haile Selassie Avenue, may be attached to finance the deficit said to be close to Sh1 billion in principal and accrued interests.

RBA chief executive officer Edward Odundo told the Business Daily that a decision was made to wind up the fund after the university failed to honour several commitments to remit the deductions.

“We are going to hold a board meeting and immediately proceed to court for orders to wind up the scheme,” Dr Odundo said.

Last month, the RBA boss wrote to the university issuing a 28-day ultimatum for action failing which the wind up process would begin. Technical University of Kenya did not respond.

The notice period lapsed last Friday, paving the way for the winding-up process to begin.

The RBA said in the letter that it had found the Technical University of Kenya staff retirement benefit scheme to be in “unsound financial condition with its funding below the minimum level prescribed in the Retirement Benefits Act, Cap 197.”

“Any arrangements by the trustees to improve the condition have been ineffective, and unsatisfactory. The scheme is at present not in a position to meet its liabilities as and when they fall due and is therefore insolvent with unremitted contributions exceeding Sh800 million,” the RBA said, adding that it intended to apply for a court order to wind up the scheme.

“The authority shall consider any representations in this regard within the next 28 days from the date of this letter without which the authority shall make such decision as the law permits without further reference to you.”

TUK vice-chancellor Francis Aduol did not respond to phone calls or text messages on the matter. Emails sent to the university’s director for communications and public affairs, Ken Ramani, were equally unanswered.

Trouble began after the institution was upgraded to a full-fledged university in 2009, forcing it to turn to statutory deductions, including pension, medical schemes and Pay As You Earn (PAYE) remittances to remain afloat.

The RBA in 2015 took over the management of the fund from Alexander Forbes after it turned out that the university’s remittances were irregular.

An interim administrator was appointed to look into the scheme’s financial health, exposing the scheme’s weak position.

“The more the scheme remains open, the more the members are losing out their savings. We therefore recommend that the scheme be wound up to give the collection mandate to the liquidator who will have more time to collect this debt. The university’s management is not committed to making contributions to the scheme, meaning the debt will continue to grow to unmanageable levels,” Octagon, the interim administrators, wrote in their final report dated May 2016.

If the RBA gets a court order to liquidate, a liquidator will be appointed with powers to attach university property and recover the amounts employees continue to be deducted every month without remission to the scheme as required by law.

Some former employees died waiting for their pension, leaving their families to battle it out with the university.

Octagon, the statutory manager, said in the report that the university was unwilling to cooperate in any process, including computing the outstanding remittances, and made them to ‘struggle to get information for determining the correctness of the liability’ for four months.

The report also accused the university’s management of arrogance, adding that “we see them doing anything to frustrate the case and hence more time required to go through the process of the case and collect the debt.”

The damning report also accused TUK of failing to comply with the required ration of contributions between the employer and the employees for the scheme registered in 2013. 

The legal demand by the RBA is likely to trigger several other demands from the university reeling from other debts, including more than Sh650 million of unremitted PAYE, and over Sh250 million owed to savings and credit cooperatives and trade unions as well as unpaid dues for part-time lecturers and suppliers.