Economy

Pension bill goes up by Sh40bn in 10 months

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The National Treasury building in Nairobi. PHOTO | SALATON NJAU | NMG

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Summary

  • Kenya’s pension bill increased by Sh39.5 billion in the 10 months to April, the sharpest growth in five years, highlighting the growing pressure on the Exchequer in paying retired civil servants.
  • This is also the first time that Kenya’s expenditure on pensions in the first ten months of a financial year crossed the Sh100 billion mark.
  • The jump highlights Kenya’s growing pension burden due to the ever-increasing number of workers exiting the public service.

Kenya’s pension bill increased by Sh39.5 billion in the 10 months to April, the sharpest growth in five years, highlighting the growing pressure on the Exchequer in paying retired civil servants.

The latest data from the Treasury shows that Kenya spent Sh113.72 billion on pensions in the period under review, a 53 percent jump from Sh74.19 billion in the corresponding period last year.

This is also the first time that Kenya’s expenditure on pensions in the first ten months of a financial year crossed the Sh100 billion mark.

The jump highlights Kenya’s growing pension burden due to the ever-increasing number of workers exiting the public service.

Thousands of public servants retired last year making them eligible for the monthly pension pay from the State.

More than 60,000 government workers retired in the three years to June 2020 and thousands more are expected to exit before the end of the year on attainment of the mandatory retirement age of 60.

The data shows that Kenya’s pension bill in the first ten months of a financial year has now grown 138 percent from Sh47.76 billion in April 2017.

The growing pension bill prompted the roll-out of a scheme where public servants are contributing for their retirement marking a shift from the past where their pension benefits were paid from taxes.

The Treasury rolled out the Public Service Superannuation Scheme (PSSS) in January last year and injected Sh20.3 billion to kick start the scheme.

Public servants are currently contributing 7.5 percent of their monthly pay to the PSSS with the government matching the contributions at a rate of 15 percent of every worker’s monthly salary.

The contributions from the State translate to about Sh6.9 billion monthly contribution or Sh55.87 billion annually, turning pension expenditures into one of the largest budget items.

Roll-out of the scheme ended a nine-year wait as the Treasury faced opposition in its bid to slice a portion of civil servants’ pay to start the PSSS and ease the pressure on the Exchequer at the back of the increasing number of retirees every year.

The National Treasury has also unsuccessfully pushed for changes to the National Social Security Fund Act 2013, to raise contributions to 12 percent of workers’ salaries, up from the current uniform rate of Sh200.

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