Govt gives in to teachers’ demands

By Sam Otieno

The Government has acceded to key demands by teachers after their union rejected the new pension scheme, The Standard can reveal.

Consequently, the cut-off age for teachers joining the pension scheme has been reviewed from 45 to 50 years, while the personal contribution will be graduated through 2, 5 and 7.5 percent in three years.

According to the report, Knut says the introduction of an umbrella contributory scheme for all civil servants would create a massive scheme with all major management challenges.

Knut had insisted that a proper analysis of the proposed scheme was necessary so as to ascertain the effects of "considerable variation" of terms of employment for teachers.

"It is in the best interest of both the Government and teachers that a comprehensive review of the proposed pension provisions be considered before teachers join the new scheme," says the report.

The report was developed following Knut’s steering committee meeting on March 23, just a week after a meeting with minister Otieno.

The minister confirmed to The Standard on Sunday that the teachers had got their way.

"We (his ministry and Knut) discussed and agreed to all the issues," he said, adding that amendments were being made to reflect the union’s wishes.

Pension review

Some of the laws relating to teachers’ pension that Knut wanted reviewed included the Pension Act (Cap 190), the Pensions Increase Act (Cap 195), Income Tax Act (Cap 470), and Retirement Benefits Act 1997 reviewed.

Knut also wanted Section 112 (Sub Section 4) of the Constitution that provides for teachers pension to be charged to the Consolidated Fund reviewed.

Another bone of contention was the cut-off age for eligibility that had been put at 45 years.

On its part, Knut recommended that the cut off date be 50 years to enable those who are within 15 years to normal retirement participate in the new scheme.

The Teachers Service Commission (TSC), however, indicated that membership to the scheme would be optional for all teachers above 45 years and currently in service.

Teachers in this category were expected to exercise their option by end of next month by completing the Public Service Superannuation scheme.

Any teacher above 45 years who will not have exercised the option by that date, the Government directive said, would be deemed to have opted to remain in the old pension scheme.

Knut had also expressed fears that the ministerial supervision would interfere with the operations of the pension scheme, hence the proposition to place it exclusively under a board of trustees, and not the pensions department at the ministry.

"Trustees should have exclusive powers over the general management and administration of the scheme. The trustees should thus be the appointing authority of any service provider," read the communiquÈ.

The new Act, it said, should ensure that the trustees retain their exclusive powers to manage and administer the scheme, including power to appoint agents.

"Further, to ensure that teachers’ accrued pension rights are protected, we propose that the government applies the average yield on Government Bonds as the guaranteed future returns and the same amount be recognised in the recognition bonds," Knut said in its report.

According to Knut, there is need to ensure that the actuarial assumptions used in determining the past service actuarial reserves for in service teachers are realistic.

Actuarial refers to a forecast of what one is likely to earn in future compared with present projections.

Teachers are keen to know the benefit of future pension schemes considering they have been pocketing free pension without contributing.

Other proposals

Knut Secretary General Lawrence Majali on Sunday confirmed the union had "agreed on all but actuarial" with the minister, adding that they would meet soon to thrash out the issue.

Other proposals are to ensure that teachers are consulted on the nature and structure of the bonds.

Knut also took issue with the proposed 7.5 percent contribution rate saying, "It is a substantial portion of earnings for teachers to cede within three years."

Knut had argued that majority of teachers have long-term financial commitments at the moment, and proposed the contribution be staggered at the rate of 2, 3 and 5 percent over the coming three years.

"We also recommend that the Government’s contribution rate at 26 percent to make the aggregate in line with the current national contribution rate of 31 percent," said the report.

In the proposed scheme, teachers are to contribute 2 percent in the first year, 5 percent in the second year and 7.5 percent in the third year.

Knut argues that on average, employees contribute at the rate of five percent and that the Government’s proposed contribution rate of 15 percent falls short of the industry average of 20 percent for public sector schemes.

"While 7.5 percent generally compares favourably well with the practice in the private sector, similar comparison with organisations that have converted their retirement arrangements would return a high contribution rate," Knut said in its memorandum that led to the fruitful talks.