Economy

Retired civil servants get 3 percent pay increase in July

CASH

Civil servants do not contribute to pension and their benefits are paid straight from taxes. FILE PHOTO | NMG

More than 300, 000 retired civil servants will from July receive a three percent pay rise, adding to the burden of keeping them happy in old age, with the pension bill rising by a fifth or Sh18 billion

The adjustment is in keeping with the tradition of increasing the monthly pension by three per cent every two years in the race to match the rising cost of living. At three per cent, the retirees still trail inflation or the cost of living measure—which stood at 4.3 per cent last year and 9.2 per cent in 2017.

The move is equivalent to an increase of Sh1.67 billion based on the pension bill of Sh86.2 billion for the year to June.

“The retirees should expect a three per cent review. We do it every two years and it is in the budget estimates tabled in Parliament last week,” a source at the Treasury said.

The review, combined with the number of civil servants who will have retired in the two years to June next year, will see the pension bill rise from Sh86.2 billion in the current financial year to Sh104.4 billion in the next budget.

Part of the pension build-up has been blamed on the Government’s failure to push through necessary reforms, including starting the long-awaited contributory pension scheme.

Civil servants, unlike workers in the private sector, do not contribute to pension and their benefits are paid straight from taxes.

This pension time bomb has continued to tick despite the decision nine years ago to raise the retirement age from 55 years to 60 years. This was to slow down the number of retirees entering the pension pool and offer the Government headroom to set up the contributory pension scheme, which has been shelved several times.