Economy

State agencies, varsities fail to remit Sh33bn in pension by September

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Retirement Benefits Authority chief executive Nzomo Mutuku. FILE PHOTO | NMG

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Summary

  • A Retirement Benefits Authority (RBA) report tabled in Parliament shows the total unremitted retirement benefit dues stood at Sh35 billion.
  • Non-remittance of retirement savings deducted from monthly salary for the workers exposes them to economic hardships when they exit employment.
  • The RBA in April allowed employers to suspend, modify or terminate their pension contributions following the outbreak Covid-19 in mid-March

State-linked entities, including public universities, failed to remit Sh33.25 billion in pension contributions by September on Covid-19 economic disruptions, leaving workers exposed.

A Retirement Benefits Authority (RBA) report tabled in Parliament shows the total unremitted retirement benefit dues stood at Sh35 billion.

Non-remittance of retirement savings deducted from monthly salary for the workers exposes them to economic hardships when they exit employment.

“Challenges at RBA include unremitted contributions of about Sh35 billion, 95 per cent contributed by quasi-government institutions — local authorities/county governments that owe to LapFund & LapTrust, public universities,” said the RBA in the report to the National Assembly Committee on Finance.

The revelation comes barely two months after the regulator put Postal Corporation of Kenya Staff Retirement Benefits Scheme under administration on failure to collect Sh1 billion in retirement benefits dues from Postal Corporation of Kenya.

It also comes at a time public universities are struggling to honour obligations such as retirement benefits, payroll taxes and insurance premiums for employees following a cash-flow crisis.

Funding for universities has been hit hard by a sharp fall in the number self-sponsored students in recent years due to a drop in the number of candidates scoring the minimum admission C+ grade in Kenya Certificate of Secondary Education.

Higher Education PS Simon Nabukwesi told Parliament recently that Moi University, the University of Nairobi, Egerton University and the Technical University of Kenya carry the biggest bill.

Pension contributions

The RBA in April allowed employers to suspend, modify or terminate their pension contributions following the outbreak Covid-19 in mid-March.

Most of the defaults were seen in sectors of the economy that suffered the most from the pandemic such as tourism and education.

The economy contracted 5.7 per cent in the second quarter, the most in nearly two decades.

Terminating, reducing or suspending pension contributions were some of the actions taken by companies to stay afloat as their revenues plummeted in the heat of the crisis.

Others were retrenchments, pay cuts, unpaid leave and renegotiating of contracts with suppliers, landlords and commercial banks.