Pensions administrator Laptrust has set aside Sh32.4 billion as potential losses from unremitted pension, signalling its worries about the continued trend of key contributors such as Nairobi County spending money deducted from workers as retirement savings.
The pension scheme discloses in the latest annual report that it has raised the loss provisions on unremitted pension, technically called expected credit losses from the contributions receivable to Sh32.4 billion in the financial year ended December 2022.
The Sh32.4 billion is equivalent to 93.1 percent of the Sh34.87 billion pension that had been deducted by workers but still stuck with employers including Nairobi County, Mombasa County and Nairobi City Water & Sewerage Company.
The three entities make up Sh31 billion or 89 percent of the unremitted contributions, with Sh21.41 billion having accumulated between April 2013 and December last year. Some Sh9.6 billion is pre-devolution debt, meaning it was inherited from the defunct local authorities.
The remaining 11 percent of the debt is owed by other county governments and other sponsors.
“The effect of the above unremitted contributions has been an increase in provisions which resulted in the decrease in the receivables which had subsequently a negative effect on the fund value,” says Laptrust.
The scheme’s value as at end of December was Sh31.26 billion, a decline from Sh31.79 billion a year earlier majorly on increased normal withdrawals and additional provisions for the outstanding contributions from sponsors.
Laptrust sees a heavy hit from the unremitted pension with only Sh346.3 million contributions delayed but being paid and Sh3.1 billion delayed but not impaired yet.
Nairobi County owes Laptrust Sh24.62 billion while Mombasa County and Nairobi Water account for Sh4.25 billion and Sh2.16 billion of the total debt respectively.
Laptrust board, through debt collectors, has managed to have the three major debtors to periodically make remittances to reduce the outstanding debt but this has not been enough to stem the growth in debt.
“The board has engaged inter-governmental agencies, controller of budget and treasury on possible recovery of the debt at source,” says the scheme.
Laptrust has been hitting the entities with penalties on delayed pension remittances. Interest is charged at a rate of 1.25 percent per year on a compounded interest basis as per the scheme’s regulations.
