Move is aimed at boosting the government’s effort to tame the rising wage bill at a time of depressed revenue collections.
Civil servants will contribute 7.5 percent of their monthly pensionable salary similar to the model used in the private sector.
PSSS also allows a member to make voluntary addition to their contributions towards their retirement benefits.
More than 70,000 civil servants will start contributing to their retirement benefits in May, boosting the government’s effort to tame the rising wage bill at a time of depressed revenue collections.
Details contained in the draft budget policy statement for 2020/2021 financial year shows the National Treasury has now committed to gazette the much delayed Public Service Superannuation Scheme (PSSS) Act 2012.
“The Act was assented to on May 9, 2012. The Cabinet Secretary is expected to appoint and gazette May 1, 2020 to be the commencement date of the Act,” the Treasury says.
Civil servants will contribute 7.5 percent of their monthly pensionable salary similar to the model used in the private sector.
“Every member shall contribute to the PSSS at the rate of 7.5 percent, which is deducted from his or her monthly pensionable salary while the government makes a contribution for each member at the rate of at least 15 percent of the member’s monthly pensionable salary,” explains the Treasury.
PSSS also allows a member to make voluntary addition to their contributions towards their retirement benefits.
This will reduce take-home pay for civil servants, something they had resisted for more than a decade.
Treasury CS Ukur Yatani is keen on fiscal consolidation and considers PSSS and reduced spending on non-essentials as one of the low-hanging fruits in cutting country’s debt from the highs of Sh6 trillion.
Kenya plans to almost halve its budget deficit in the next four years to 3.3 percent of gross domestic product from an estimated 6.3 percent in the fiscal year ending in June.
This is amid spending pressures and depressed tax collections that has seen Mr Yatani propose a cut in budget size from the current Sh2.87 trillion to Sh2.74 trillion as he calls for tightening of purse strings.
The Treasury notes that the increasing number of retired officers and the increased life expectancy rate has significantly contributed to the increased wage bill in government.
A 2009 actuarial study commissioned by government found that there was a contingent pension liability of Sh499 billion at the time. The liability nearly doubled to Sh990 billion in 2014.
The pension budget has increased by more than three-fold in the last 10 years from Sh25 billion in 2008/09 to Sh86 billion in 2018/19 financial year.
The Treasury forecasts it will need Sh109 billion in the year starting next July for pension payouts, rising to Sh153 billion in the year ended June 2022, reflecting a 20 percent rise.
Gazetting the commencement date and setting up a multi-sectorial team to oversee its implementation was among the 15 resolutions passed in November last year during the National Wage Bill Conference convened by the Salaries and Remuneration Committee.
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