Pension dues to cut civil servants’ pay

Head of Civil Service Joseph Kinyua says State employees aged below 45 years will be enrolled into the new scheme. [File, Standard]

Public servants will, beginning January next year, take home reduced pay as they begin footing their pension bill.

The Government employees will be deducted 7.5 per cent of their basic pay to go towards saving for their retirement.

This is as the State rolls out the new Public Service Superannuation Scheme for civil servants, teachers and disciplined services.

In the first year, civil servants will be deducted two per cent of their basic pay. This will graduate to five per cent in the second year and 7.5 per cent in the third year. In addition to the employee contribution, the Government will contribute 15 per cent of their basic pay.

Government entities that fail to remit both the employees’ as well as their contribution to the scheme will be penalised.

“The Public Service Superannuation Scheme will commence on January 1, 2021…. Subsequently, the current scheme will be closed to new entrants and the accrued benefits for those who join the new scheme will be calculated and paid into the scheme,” said Head of Public Service Joseph Kinyua.

Mr Kinyua noted that the scheme will cover civil servants, teachers and disciplined services personnel (National Police Service, Prison Service and National Youth Service).

“Employees will contribute 7.5 per cent of their basic salary. Employees will have the option to make additional voluntary contributions above the mandatory 7.5 per cent of their basic salary. Where an employee takes this option, the government will not increase its contribution…. the employer will contribute 15 per cent of the employee’s basic salary.”

He said the 31 per cent pension contributions will cease with effect from January 1, next year for the employees who join the scheme.

Kinyua noted that State-owned entities which fail to remit money to the scheme on time would be penalised three per cent compound interest rate to ensure compliance.

“Accounting officers shall remit employee and government contributions by the 10th day of the next month following the due date,” reads the circular in part. “Where the accounting officer fails to deduct a member’s contribution, the sum will attract a compound interest at the rate of three per cent per month.”

The staff to be covered under the scheme will be those on permanent and pension terms below the age of 45 as well as those joining public service. Civil servants aged over 45 can also join the scheme.

The scheme is expected to save government billions of cash according to the Salaries and Remuneration Commission.