Faced with pensions time bomb, Kenya asks government workers to pay up

The government launched a contributory pension scheme for hundreds of thousands of government workers on Wednesday, to prevent a crisis in the government’s finances from growing retirement obligations.

Kenya, which is facing reduced tax revenue due to the coronavirus crisis and ballooning debt repayments, has been spending 2.9 per cent of its annual budget on pensions payments, the ministry of finance said, in a plan that does not involve contributions by individual workers.

Its annual pension bill is projected to climb to more than Sh100 billion in the financial year started last month, from Sh27.9 billion in 2013/14.

“If unchecked, the spiralling pension costs will rapidly get out of control in the very near future,” Julius Muia, the principal secretary at the finance ministry, told an online launch ceremony.

Under the new scheme, which will kick in next January, employees will be allowed to contribute up to 30 per cent of their monthly salary to a fund, which is expected to collect more than 3 billion shillings every month.

The scheme will be managed by an independent board of trustees, said Ukur Yatani, the finance Cabinet Secretary.