Uhuru gives new lifeline to Kenya's workers

By David Ochami and Luke Anami

Workers, who retire on health grounds, or migrate to other countries, can now access a substantial or full amount of their retirement benefits before age 60.

In new regulations published by Finance Minister Uhuru Kenyatta, on September 30, but tabled in Parliament last Thursday, members of pension schemes will not have to wait until they are 60 to access retirements benefits, with accrued profits.

In the new policy, Uhuru amended regulation 19 of the Retirement Benefits Regulations, which deferred refund of employers’ contributions until the member attained the retirement age, except in the case of ill health and incapacitation. “Where a member leaves employment after three years of membership but before attaining the specified early retirement age, he may opt for payment of not more than 50 per cent of his accrued benefits,” read part of the amendment.

The regulations now allow an employee to access part of his employer’s contributions when transferring to a new employer. Previously, those transferring to a new scheme could only transfer a third of their benefits from the previous scheme.

Under the previous regime a member of a scheme would only be entitled to a third of contributions on leaving employment or membership after a year, but before reaching the statutory retirement age after evaluation by an actuary.

But in the new policy a member who leaves employment after three years of service before attaining the retirement age shall be entitled to receive half of accrued benefits and the full amount of their own contribution and half of the employer’s contribution where they are members of a defined contribution scheme.

“A member may opt for payment to him, of the total amount of the vested accrued benefits before attaining the retirement age on grounds of ill health or subsequently during deferment, if the member becomes incapacitated due to ill health, to the extent that it would occasion his retirement if he was on employment.” However, major beneficiaries of the new law are Kenyans seeking to leave the country permanently.

The new policy allows full benefits with accrued profits for members emigrating without intending to return.

Under the new regime members certified to have emigrated from Kenya for good will receive full benefits. However, the new policy is silent on the transfer of contributions from a scheme to another.

However, the move is likely to burden retirement benefit schemes, as they will now be required to pay out benefits much earlier than initially planned. A number of them have committed the funds in long-term investment ventures.

Further the amendment comes at a time the retirement age was adjusted to 60 from 55 years, last year.

The new regulations, published last week, prompted Saboti MP Eugene Wamalwa to withdraw an amendment he had brought on the Retirement Benefits Act 1997.

Following the tabling of the regulations, Wamalwa was forced to withdraw his proposed amendment in which he sought to reduce the pain of accessing benefits by workers who retire early or leave employment for various reasons before attaining age 55 or 60. These regulations apply for all employees who remit statutory deductions and to private schemes under the Retirement Benefits Act.

During this year’s Budget, Uhuru sought to amend the law to cut the maximum amount of time a pension scheme can take to determine and pay benefits after a member retires, from 60 days, to 30 days.