Capital Markets

Pension payout to retired public servants rises to record Sh145bn


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

Expenditure on retired public servants for the fiscal year ended June grew at the fastest pace in six years, pointing to improved processing of the payouts by the Treasury.

Pension and gratuity payouts grew 32 per cent to a fresh record of Sh145.6 billion compared with Sh110.3 billion in the prior year, Treasury Secretary Ukur Yatani says in the exchequer data for the year ended last month.

The benefits, however, lagged the Sh153.6 billion target in the review period by Sh8.0 billion or 5.2 per cent.

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.

Mr Yatani said the pensioners and dependents had crossed 300,000 last December, and that the number was expected to continue growing.

“The National Treasury will roll out, the much-awaited re-engineered pension management system in the course of the financial year [starting July],” the Treasury chief said on April 7.

“The system will offer an end-to-end Enterprise Resource Planning solution in the management and processing of pension benefits.”

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 in January 2021 where public service workers contributed 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 Public Service Superannuation Scheme (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 rollout of the contributory retirement plan, after a delay of more than eight years since the Public Service Superannuation Scheme (PSSS) Act became law, is expected to ease pressure on taxpayers

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