Expenditure on pensions and gratuities which stood at Sh57.65 billion in the July 2019-February 2020 period was however Sh16.18 billion more than the same period a year ago.
The Treasury has budgeted Sh104.49 billion towards retirees’ payroll —reflecting a rapidly ageing workforce in the public service.
The pension pressure has continued to pile on taxpayers despite a decision nine years ago to raise the retirement age from 55 to 60.
Payment to retirees lagged Treasury’s target in the first eight months of the current year by Sh12 billion on prorated basis, latest exchequer statistics show.
Expenditure on pensions and gratuities which stood at Sh57.65 billion in the July 2019-February 2020 period was however Sh16.18 billion more than the same period a year ago.
The Treasury has budgeted Sh104.49 billion towards retirees’ payroll, whose beneficiaries are largely the most vulnerable to Covid-19 infection partly due to low immunity levels—reflecting a rapidly ageing workforce in the public service.
The pension pressure has continued to pile on taxpayers despite a decision nine years ago to raise the retirement age from 55 to 60.
Treasury secretary Ukur Yatani said in February that the payments shortfall “was due to slower than targeted processing of pension payments”.
Part of the pension build-up has been blamed on the Finance ministry’s failure to push through necessary reforms, including starting the long-awaited contributory pension scheme for the civil service despite the law having been enacted in 2012.
Civil servants, unlike workers in the private sector, do not contribute to their pension and their benefits are paid straight from taxes.
Mr Yatani has pledged to gazette May 1 as the commencement date for the contributory Public Service Superannuation Scheme by enforcing the Public Service Superannuation Scheme (PSSS) Act, 2012.
Civil servants will contribute 7.5 percent of their salary to the retirement scheme, with the government matching every worker’s monthly contribution at the rate of 15 percent of the pensionable salary.
“A member may also make voluntary addition to their contributions towards their retirement benefits in the PSSS,” Mr Yatani says in Budget Policy Statement (BPS) currently before parliament.
“The government is also mandated to take out and maintain a life insurance policy that has disability benefits in favour of every member of the scheme. The policies must be worth a minimum of five times the member’s annual pensionable emoluments.”
The terms under the new scheme are different from previous requirements where civil servants were supposed to contribute two percent of their salary in the first year, five percent in the second and 7.5 percent from the third year onwards.
A considerable share of those retiring are in senior management levels and technical cadres with critical skills and competencies, a situation which may force the State to retain some of them beyond the retirement age of 60 due to a skills shortage.
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Note: The results are not exact but very close to the actual.
