Public pension crisis as 20,000 government staff retire this year

Kenya’s public pension bill is set to grow by a fifth to Sh86.2 billion in the coming fiscal year with nearly 20,000 civil servants retiring in the year starting July.

The pension budget will increase from the current Sh71.8 billion to Sh104.4 billion in 2019/20 to keep retired civil servants comfortable in old age.

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

The problem has continued to grow despite the decision nine years ago to raise the retirement age from 55 to 60 years.

The move was meant to slow down the number of retirees entering the pension pool and offer the government some headroom to set up the contributory scheme, but the latest budget estimates show the move has not reduced taxpayers’ burden.

“The total number of retirees is projected to rise from 19,300 in the financial year 2017/18 to 19,800 in the year 2018/19 and further to 20,300 in 2019/20,” said the Treasury.

READ: Jobs, pensions crisis as 37pc of civil servants set to retire

Kenya’s civil service is aging and 37 per cent of workers are expected to retire in the next decade. The Public Service Commission (PSC) said the share of civil servants above the age of 50 increased from 35 per cent in the year to June 2016, to 37 per cent last year.

At Sh86.2 billion, the pension budget dwarfs the Housing ministry’s Sh32.2 billion allocation, Water (Sh41.2 billion) and Energy (Sh62 billion).

The amount will then jump to Sh104.4 billion and Sh126.4 billion in fiscal year 2018/19 and 2019/20 respectively.

There is no pre-funding of pension liabilities and the government runs the scheme on a pay-as-you-go basis using tax collections.