Parliament has set aside Sh1 billion to pay for post-retirement medical insurance cover for civil servants in the financial year starting July 1.
This follows a push by the State to have medical cover to be included in the self-funded pension scheme for civil servants.
The Treasury and the State department of public service have developed a post-retirement health cover for the 663,000 government workers.
“The committee recommends an additional Sh1 billion to the Public Service Human Resource Management and Development to cater for Post-Retirement Medical Insurance Scheme for civil servants,” the Budget and Appropriations Committee (BAC) said in a report on the Budget Policy Statement (BPS) for 2023/24 that was adopted by the House.
“That, once approved by this House, these recommendations shall form the basis of the 2023/24 budget estimates.”
The government launched the new contribution pension scheme for civil servants dubbed the Public Service Superannuation Scheme (PSSS) which took effect on January 1, 2021.
The scheme covers all employees of the public service who have been recruited through the Public Service Commission, Teachers Service Commission, the National Police Service Commission and any other service that the Cabinet Secretary determines to be public service as per the law.
Public servants, unlike workers in the private sector, were not contributing to their pension until January 2021. Their retirement benefits are paid straight from government revenue, largely taxes.
The Treasury rolled out a contributory pension scheme where public service workers parted with two per cent of their gross pay towards retirement savings in 2021, rising to five per cent in 2022 and 7.5 per cent thereafter. The government contributes 15 per cent of the gross pay.
Under the PSSS, workers who resign from public service are entitled to pension benefits after five years with no age restrictions.
This is unlike the previous scheme where it took 10 years from the time a worker resigned from the government to get benefits or on the attainment of the age of 50.
Civil servants are free to increase their contributions to a rate above 7.5 per cent, but the government share remains intact.
The government launched the PSSS after the pension wage bill rose from Sh27.9 billion in the financial year 2013/14 to Sh145.6 billion in the year to June 2022.
The pension’s payroll has been soaring in recent years on the back of a fast-ageing public service, piling pressure on taxpayers amid delays in implementing reforms in the past.
The Treasury revealed that pensioners and dependents had crossed 300,000 last December and that the number was expected to continue growing.
The new pension scheme has a medical savings component to help retiring workers avoid the problems of having to meet the high costs of healthcare when they retire.
Most Kenyans who enjoy medical cover during their working life go into retirement without any backup after they part ways with their employers.
Buying medical cover at an advanced age is usually expensive to the individual considering the insurers will factor in pre-existing conditions, impose a lot of restrictions and charge high premiums.
This leaves the elderly relying on family and friends’ contributions when they get sick.
Very few Kenyans save for retirement and are forced to look for work even after attaining the age of retirement to meet basic needs.