Workers to pay less for pension under new law

A State-backed Bill has proposed the creation of an umbrella pension scheme with better benefits for county employees.

The Bill also proposes punitive sanctions for counties that fail to remit workers' contributions.

The proposals, which have been endorsed by Treasury Cabinet Secretary Henry Rotich, make it mandatory for all county employees to contribute to the new universal scheme that will replace all other individual schemes associated with county governments.

Among some of the changes the Bill is making to entice members is the lowering of the minimum deductions that employees are supposed to make from the current 12 per cent, to 7.5 per cent.

Counties have been remitting at a rate of 15 per cent for every employee, and will keep doing so at the same rate, according to the County Governments Retirements Scheme Bill 2018.

But what is arguably the biggest score for the employees is that they will now be able to afford a life insurance cover through their annual contributions to the scheme.

“The county government shall take out and maintain a life insurance policy that has disability benefits in favour of every member of the scheme, for a minimum of three times of the member's annual pensionable emoluments,” the Bill reads.

It also addresses a persistent problem from county authorities failing to remit deductions made from employees’ salaries, raising the amount of unremitted pension from Sh6.2 billion when county governments came into office, to the current Sh30 billion.

Pay interest

If the Bill is passed into law, counties will now be required to pay interest if they fail to remit employee deductions by the 10th day of every month.

“All unpaid contribution and interest there on shall constitute a civil debt that will be recovered through instruments of the law,” states the Bill.

The Bill is set for debate in the Senate, and has been proposed by Nairobi Senator Johnson Sakaja.

Mr Sakaja has previously faulted county governments' failure to remit pension deductions, and the inclusion of a clause seeking punishment for refusing to remit in the Bill comes as no surprise.

“Remitting employees’ deductions is not a favour but a right. We can find a way to put some funds in the county coffers through the allocation of County Revenue Bill to see if the debt can be settled,” Sakaja said in a past interview.

Joe Donde, a pension law expert, told The Standard that the Bill was in tandem with Treasury’s quest to reform the pension sector.

"Treasury sent its representative during consultations to create it. The entire industry was represented including worker’s unions, Retirement Benefits Authority (RBA), Council of Governors, the Senate and Public Service Board," he said.