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Economy

Treasury headcount to catch ghost pensioners

National Treasury building
National Treasury building. FILE PHOTO | NMG  

The Treasury is next month expected to roll out a headcount of retired civil servants in a census intended to weed out thousands of ghost pensioners that could be siphoning millions of shillings monthly.

The headcount will require all the 300,000 retirees on the government payroll to present themselves at Huduma Centres countrywide. It is intended to curb the government’s ballooning pension bill that is expected to surpass the Sh100 billion mark next year.

The Pensions Department estimates that taxpayers are paying relatives and dependents of dead people retirement benefits, helped by the growing use of ATM cards and mobile banking, which do not require the physical presence of beneficiaries in banking halls.

The vetting will start on February 11, from when pensioners will have a month to appear in person to present their identity cards and bank slips at their nearest Huduma Centres.

The Treasury plans to stop wiring cash to the bank accounts of retirees who fail to show up for vetting.

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“Persons who fail to make it to the headcount will be presumed dead and payments to their bank accounts will be stopped,” said a top Treasury official familiar with the impending census.

“Mobile banking and use of ATM has raised the risk of payments being made to the deceased’s dependents. It is easier to withdraw the benefits on behalf of beneficiaries.”

Most State pensioners were previously paid through the State-owned Postbank, which demanded that the retirees appear in person to withdraw their benefits.

But the automation of Kenya’s banking sector and opening the payments to all of Kenya’s 42 banks has over the years reduced the need for pensioners to collect their benefits from tellers.

The Auditor-General, in a 2015 report, warned that advancement in the banking sector and an ageing pension payment system had made it difficult for Kenya to maintain a clean retirees’ payroll, leading to the loss of billions of shillings of taxpayers’ cash.

The auditor-general found 12,000 false names on the State payroll, and established that more than Sh100 million a month was lost in payments to “ghost workers”.

Former workers were continuing to receive salaries after leaving the Civil Service, while millions of shillings were being pocketed by insiders through collusion.

The pension department is now grappling with a similar problem of ghost pensioners at a time when taxpayers are shouldering rising retirement costs.

The linking of bank accounts to mobile phone wallets is more problematic to the Pensions Department because unlike ATM cards, which expire in three to five years, the telephony link is timeless.

The Pensions Department told the Business Daily that it did not have a reliable estimate of the number of ghost pensioners on its payroll.

Taxpayers in the current year to June will pay Sh90.6 billion to retired civil servants, up from Sh15 billion in 2002, underlining the growing burden of keeping former public servants comfortable in retirement.

The figure is expected to rise to Sh109 billion next year, making the Pensions Department one of the few State agencies to set back taxpayers in excess of Sh100 billion annually.

The Public Service Commission says that nearly a third of civil servants are aged above 50, and that 40,100 are set to retire within two years.

Less than 10,000 pensioners exit the payroll annually, a figure the Treasury reckons does not match Kenya’s life expectancy ratio.

The rising pension bill, which is projected to increase further to Sh152 billion in three years, risks derailing government efforts to shift public spending to development projects such as building of roads, ports, railways and power plants, among other productive sectors that boost economic growth.

The Pensions Department says the number of retirees will in two years overtake the count of all county and ministry staff who stood at 330,000 in 2017.

The figure excludes teachers who number about 302,000.

This informs the State’s proposed plan to weed out ghost pensioners from the payroll and lower the government’s retirement costs.

Part of the pension time bomb build-up has been linked to the government’s failure to push through necessary reforms, including kick-starting the long-awaited contributory pension scheme.

The time bomb has continued to tick despite the decision 10 years ago to raise the retirement age from 55 years to 60.

The move was meant to slow down the number of retirees entering the pension pool and offer the government some headroom to set up a contributory pension scheme, a plan that has been shelved on several occasions.

Kenya’s public workers have since Independence enjoyed free retirement benefits that are fully paid for by taxpayers through the Consolidated Fund.

The government has failed to move the current scheme to a defined contribution plan, a reform that has remained on ice since 2013 and which would have eased pressure on taxpayers in the long term.

Under the scheme, civil servants were to contribute 7.5 percent of their salary to the retirement fund.

The government, as the employer, was to match every worker’s monthly contribution with an equivalent of 15 percent of each civil servant’s salary.

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