Pension crisis builds over "computer error"

Acting Pensions Secretary and Director of Pensions Shem Nyakutu when he appeared before Nakuru High Court for the hearing of a case filed by over 52,000 retired teachers on 15-8-2016. [Joseph Kipsang/Standard]

An estimated 20,000 public officers who have retired this year are caught in a pension crisis occasioned by a supposed system failure that has delayed their dues for over five months.

Processing their retirement benefits is suspended, with the backlog helping understate payouts, but responsible officials deny it has anything to do with lack of funds.

Fear about lack of funds was compounded when the Treasury decided to carry out an audit of the beneficiaries through a physical countrywide headcount as this year’s pension bill exceeded Sh104 billion – more than double the amount in 2013.

Findings of the headcount has since revealed 40,000 ghost beneficiaries, some having died several years ago, yet some people were still drawing the benefits aided by use of ATMs and mobile banking.

Some Sh20 billion allocated for paying retirement packages for officers who exited public service this year is still lying at the Treasury’s banking accounts at the Central Bank of Kenya, according to Pensions Secretary Shem Nyakutu.

And to clear the build-up of pending cases, Mr Nyakutu said he was recruiting 120 officers through Public Service Commission, who would also help handle the expected surge in pensions processing.

“We are currently dealing with the backlog from the various ministries, Teachers Service Commission and disciplined forces,” he said.

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Monthly disbursements to over 200,000 beneficiaries who were confirmed as alive during the audit were uninterrupted, added the Pensions boss.

From the current Sh104 billion, the pension bill is projected to climb to Sh110 billion in the next financial year, which starts on July 1, helped by the huge number of new retirees exiting service.

An additional expense as the Government’s contribution to the newly-formed civil servants’ superannuation fund, a contributory scheme for employees of various ministries, is also expected to pile pressure on the taxpayer.

The Treasury will match the 7.5 per cent contribution deducted from the workers’ salaries.

Over the next four years, the pension bill is projected to touch Sh160 billion, which is equal to one out of every Sh10 expected in tax collection by KRA in the new financial year.

Some of the 70,000 civil servants aged 45 years or below will from July 1 start contributing to the pension scheme.

New fund

But since it is not mandatory for workers who have attained 46 years or more, the payout is expected to climb as they gradually retire over the next 14 years when they turn 60.

Such senior workers will get their full pension benefit paid by the taxpayer, besides any savings they would have in the superannuation scheme, if they opt to join.

According to the PSC, the new fund will be guided by the Public Service Superannuation Scheme Act of 2012. At the same time, part of Government’s contribution will be a direct charge on the Consolidated Fund.

Stiff objection from the workers’ lobby has, however, ensured the pension burden remained on the taxpayer.

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