Railways retirement scheme closer to clearing debts

By Standard Reporter

Kenya Railways Staff Retirement Benefits Scheme (KRSRBS) expects to realise about Sh4 billion from sale of selected assets in Nairobi and Mombasa.

KRSRBS Chairperson Beryl Odinga said the disposal of Chambilo estate in Mombasa and White house in Nairobi, among other selected properties would improve the organisation’s liquidity and raise its ability to pay pensioners.

"The strategy will improve liquidity and is a milestone in complying with Retirement Benefits Authority’s (RBA) requirement of only maintaining 30 per cent scheme assets in form of property," she said in Nairobi.

Speaking during the annual general meeting, Odinga said the refurbishment of block D commercial building in Nairobi’s city centre and repair of roofs of residential houses in Upper Hill estate had enabled the scheme charge commercial rent on the properties.

She said the Board of Trustees — in consultation with fund managers — had also developed a strategy for redevelopment of property in Ngara, Makongeni and Land Mawe estates with private sector on equity, or joint venture basis.

Alexander Forbes Financial Services (EA) Ltd, an actuarial and administration provider, was recently awarded a tender to provide actuarial services to the scheme.

Co-op Trust Investment Services Ltd is the fund manager and Kenya Commercial Bank Ltd is the custodian.

Citing a valuation of properties undertaken in the period ended June 30, Odinga said the scheme’s assets have grown from Sh17 billion to Sh21.1 billion, but sale of Muthurwa estate was slowed down a court case filed by tenants.

"The disposal process of Muthurwa estate has been slowed down. The Scheme was not able to collect rent from Muthurwa estate for the last one year, hence affecting the cash flow projections," she said.

Trust deed

The Scheme was established by Kenya Railways Corporation (KRC) vide a trust deed signed on May 3, 2006. KRSRBS inherited the liabilities and assets provided for by the Kenya Railways Act Cap 397.

During the process of concessioning KRC, the Government set aside assets worth Sh12.4 billion to be transferred to KRSRBS. The approval took effect from September 7, 2006.

Odinga was optimistic that the liquidity change would address the pensioners arrears of over Sh394 million, and deferred members current lumpsum amounting to Sh75 million in the near future.

She said KRSRBS has 9,468 pensioners with monthly bill of Sh56 million amounting to Sh672 million per annum. She also said the current minimum pension payable to members is Sh2, 000 monthly.

She said the Scheme had already paid a total of Sh278 million in terms of pension arrears and lumpsum to deferred members, leaving a balance of Sh394 million payable to pensioners.

From January next year, KRSRBS will start the process of updating the data from deferred members to capture changes and ensure current dependants are reflected.

Actuarial valuation

Odinga said the KRSRBS Board of Trustees is also reviewing the pension policy increase of eight per cent as per the recommendations actuarial valuation report for the year ended on June 30.

She said once the policy is implemented, it will be forwarded for approval to address issues of harmonisation of pensions requested by KRSRBS members .

Results of the actuarial valuation have projected deferred members liabilities at Sh3.7 billion and pensions at Sh6.8 billion.

KRSRBS is in the process of designing pensioners and deferred members identity cards.