Navigating the shaky tracks at KR pension scheme

By Morris Aron

That Muthurwa, the old residential estate immediate east of the Central Business District (CBD), is about to be sold, then pulled down has raised a whole lot of furore is understandable.

The prime land near the CBD is undoubtedly the best asset any investor would want.

The disposal of Muthurwa and other properties belonging to the Kenya Railways Pension Scheme is just one of the several hot potatoes to grapple with.

“First, a lot of people cannot differentiate between Kenya Railways Corporation and Kenya Railways Retirement Benefits Scheme, and of course issues related to interests on property and land,” says Mathews Tuikong, the chief executive of Kenya Railways Retirement Benefits Scheme.

“The pension scheme is a completely different entity — a closed fund with a mandate to ensure that former employees of Kenya Railways get their pension,” he says.

Pioneer 8-4-4 graduates

The old boy of Sacho High School, who grew up in Uasin Gishu, and who was among the first group under the 8-4-4 system of education, has his facts about the scheme.

Tuikong was the first employee of the pension scheme when it came into place, having joined Kenya Railways as an administration officer after clearing his undergraduate in Government and Public Administration.

After capping his undergraduate studies with a postgraduate diploma in human resource management, the history and literature major, had his last stint at KR as a project manager in charge of human resources and pensions.

“I was a counterpart officer during the concession of Kenya Railways. The rest led me to where I am,” Tuikong says.

urgent issues

Between 2003 and 2005, Kenya Railways signed an agreement with a number of investors on the advice of the World Bank, the Kenya Government and a host of investors to ‘modernise’ the railway system.

The outcome was Rift Valley Railways and the subsequent developments that were witnessed recently.

As the concession proceeded, one issue that needed to be tackled fast was how to handle pension of KR employees owed in excess of Sh12.6 billion.

Then there was the new Retirement Benefits Authority laws, which required that no company handle employees’ pension in the same account.

This, according to Tuikong, led to the creation of the pension scheme.

KR transferred property worth Sh12.4 billion to Kenya Railways Retirements Benefit Scheme so as to enable the organisation pay the pensioners.

A recent valuation indicated that the assets have since grown to Sh17.1 billion.

But there still is one problem. The pension scheme had the responsibility to pay all pensioners immediately, yet was illiquid.

“Except for the assets, there was no cash injection when the pension body was formed,” Tuikong says.

Rental income from the properties generated a paltry Sh28 million, as some KRC staff never paid rent.

However, in total, the scheme needed Sh50 million a month to pay the pensioners.

“Something needed to be done to have the pensioners get their pension. We were rich as an institution but very limited on cash,” said Tuikong.

“It was then that the board of trustees came up with a raft of proposals to help the institution bridge the difference in rental income and the responsibilities it had.”

Among the proposals was one that commercial properties be refurbished to attract more rent.

Some that were done include the Kenya Railways headquarters, where Easy Coach, a bus service company is stationed.

The second proposal was the disposal of several properties that included Muthurwa, Matumbato.

There was also a proposal to redevelop some properties key among them being Makongeni, Landi Mawe and Ngara.

Also suggested was that KR transfers title deeds to the pension scheme, which ended up taking so long.

Soaring pension bill

As the horse-trading took place, a host of issues needed to be sorted out fast besides the monthly bill in payments to pensioners.

As it stands 18 out of the 25 tittles have been transferred.

“In total, Sh3.5 billion is expected from the disposal of Muthurwa and Matumbato to facilitate cash flows and pay pensioners,” said Mr Tuikong.

“The re-development, however, is yet to commence even after a feasibility study was carried out.”

A couple of months ago, when the advertisements were done to effect the sale of Muthurwa and Matumbato, hell broke loose.

That was when a cabal of politicians, businessmen and wheeler-dealers trained their guns in a free for all jostle for a piece of the 72-acre prime parcel of land.

“I believe this is the best way for pensioners to get a better life through revised monthly payments,” he says sipping tonic.