Taxpayers could pay at least Sh3.2 billion in gratuity to MPs and senators who served in the last Parliament.
This is according to proposed amendments to the Parliamentary Pensions Act that seeks to award Sh7.9 million in send-off packages to MPs and senators for each term served.
If approved, taxpayers will be on the hook for at least Sh3.2 billion in gratuity to the 416 MPs, senators and women representatives, who served in the 12th Parliament, including over 200 lawmakers who did not make it back to the House after last year’s General Election.
Section 7 of the proposed Parliamentary Pensions (Amendment) Bill, 2023 provides for MPs and senators to opt to either receive their pension or a gratuity payment once their term of office expires.
“A person shall be entitled to receive gratuity under this section where the person ceases to be a Member of Parliament and has served an aggregate period of five years or less,” explains Section 7 of the Bill.
The Bill also provides for MPs and senators who have served more than one term to opt to receive a gratuity instead of a pension. The gratuity is calculated at a rate of 31 per cent of the basic monthly pay of MPs, senators and women reps, which currently stands at Sh426,000, according to the latest pay review by the Salaries and Remuneration Commission, SRC.
Currently, the law provides for MPs to contribute 12.6 per cent of their basic salary towards their pensions, while the government matches this at the rate of 25.4 per cent. This brings the total pension payout for MPs, senators and women reps to Sh9.7 million for each five-year term served, translating to a cumulative Sh4 billion pension bill for taxpayers for each life of Parliament. The proposed Parliamentary Pensions (Amendment) Bill, 2023 further indicates that sitting MPs who opt to earn a gratuity are still eligible to draw their pension if they remit the required 12.6 per cent contribution.
“If after receiving gratuity under Subsection (2) the member elects to pay pension contributions under Section 4, the member may, if he so desires, repay all the gratuity paid plus interest at the rate of three per cent per month and pay the contributions under Section 4 for the entire period of non-contribution to match up with existing contributors,” states the Bill.
This means sitting MPs can claim gratuities and also remain eligible to receive pensions and chose whether or not to refund the gratuities they received for past terms.
This is the third attempt to introduce gratuity payments for first-time MPs after President Uhuru Kenyatta last year declined to assent to the Parliamentary Pensions (Amendment) Bill, 2019 following public outcry over the wage bill. Giving submissions on the Bill in 2020, Treasury said while presenting MPs with the option of a gratuity or a pension was convenient, the decision should be irrevocable to prevent doubling the send-off package for lawmakers.
“The net effect of the amendment will be that the government meets the full cost of contributions since members will not have contributed towards the funding of their pension,” said the National Treasury in submissions to Parliament’s Departmental Committee on Finance and National Planning.
“This translates into receiving both service gratuity and a pension thus overburdening the taxpayer. In such a case, the member should refund the gratuity and make contributions for the entire period of non-contribution.”
This recommendation was adopted by the Departmental Committee, which set the refund of gratuity as a condition for rejoining the parliamentary pension scheme.
“The committee agreed with the comments by the National Treasury on clause 8, which touches on subsection 7 (5) and, therefore, resolved to propose a deletion of the amendment,” said Parliament’s Departmental Committee on Finance and National Planning in its report.
“This implies that if a member during his/her first term elected to be paid gratuity and then during the second term he or she elects to be pensionable, he or she will be required to refund the gratuity paid with interest and then make contributions for the months he or she had not contributed,” said the report.