Payouts to retired public sector workers jumped 40.39 percent in the first half of the current financial year as the Treasury raced to reduce backlog from the previous fiscal year.
Latest official numbers showed the Pension Department at the Treasury processed Sh82.84 billion in pension claims in the six-month period to last December compared with Sh59.01 billion in the same year a year earlier.
The government has been struggling to disburse pension funds due to shortfalls in revenue collections, deepening the economic hardships for retirees, some of whom die without reaping the benefits of years of service to the public.
The Treasury, for instance, carried over Sh23.78 billion in pension claims which were due last financial year ended last June to the current year, citing a shortfall in revenue.
This happened despite the retiree dues being a “first charge” paid under disbursement under Public Finance Management law together with debt repayments and salaries to State officers.
The pensions payment challenge was been compounded by President William Ruto’s order in July that public servants who attain the retirement age of 60 must exit the government.
Dr Ruto’s directive has unsettled decades-old practice where civil servants with special technical skills and expertise have been retained beyond the retirement age to train younger staff.
The growth in pension pay in the first half of the current financial year is the fastest since the financial year 2021/22 when the Treasury was clearing a backlog emanating from Covid pandemic shocks. That was after Covid-induced shutdowns curtailed movement for the retirees, curtailing the largely paper-based pension payment process.
The growth in the disbursement of funds for pensioners has come at a time the Treasury has announced plans to revamp the public service pension administration “through digitization and re-engineering of the pension management system”.
“Digitisation will streamline processes, improve accuracy, and facilitate timely pensions payments,” the Treasury wrote in the draft 2025 Budget Policy Statement. “This also enables better monitoring and management of pension-related matters while re-engineering will complement the digitisation by availing an end-to-end Enterprise Resource Planning (ERP) solution that takes advantage of the modern IT technologies.”
Despite the jump for the review period, the pension payments still lag the target by Sh28.74 billion, or 25.75 percent, on a pro-rata basis going by the full-year budget of Sh223.15 billion.
The rising pension bill expenses, triggered by the mass retirements, have brought to the fore a possible job crisis in the ageing civil service amid the suspension of new recruitment pending completion of an ongoing audit and cleansing of public payrolls and pension bills to “eliminate ghost workers”.
The pressure has continued to pile on taxpayers despite a knee-jerk decision in 2009 to raise the retirement age from 55 to 60, partly due to Treasury’s past failure to push through necessary reforms, including a contributory scheme.
This has seen pension claims, paid directly from the exchequer, surge from Sh25 billion in the financial year ending June 2009 to the Sh223.15 billion estimates for the current year ending June 2025.
Some 85,400 public service workers were expected to retire in three financial years ending June 2026, according to the Pensions Department at the National Treasury.
These comprise 30,155 workers in the just-ended financial year, 28,745 this fiscal year ending June 2025, and 26,500 in the subsequent year.
