County workers risk retiring without pension savings

Laptrust building along Parliament road, Nairobi. (Photo: Elvis Ogina /Standard)

County Governments have not been remitting employees’ pension money amounting to Sh18.6 billion to the Local Authorities Pensions Trust (Laptrust).

As at September 30, 2017, Nairobi County, which accounts for 70 per cent of county employees membership in Laptrust, accounts for Sh12 billion of this amount, according to Laptrust fund manager CPF Financial Services Group.

“One of the main challenges for Laptrust is the issue of debt owned by county governments. Late remittances and outright failure by the county administrations to remit members contributions in full have continued to exacerbate the situation,” CPF CEO Hosea Kili said yesterday during Laptrust Annual General Meeting.

“While part of the debt was inherited from the now defunct local authorities, county governments have subsequently piled up a substantial amount of debt in the post devolution era.”

The debt has ballooned from Sh6.2 billion in 2014 when county governments came into office to replace local authorities.

Kili said the problem started to expand into an uncontrollable proportion because county governments delayed to handle such inherited liabilities from the local authorities when they took over.

Laptrust currently has a combined value of Sh40 billion and has a membership of 40,000.

County employees contribute to the scheme at the rate of 12 per cent of their pensionable salaries while the county governments in turn, contribute to the same scheme at the rate of 15 per cent of the employees’ pensionable salaries. 

The outstanding debt now threatens to bankrupt the scheme and see county pensioners lose out on payments in their retirement.

According to Kili, the scheme has been able to withstand the debt burden and pay the retirees only because of fair gains made on the property investment portfolio and a cross-sectional growth in other investments.

“We are hoping that with cooperation from county governments, we can at least reduce the debt by 80 per cent in the short term and put the scheme to a robust footing again,” Kili said. 

Kili’s hope of reducing the debt could be swimming in some very cold waters since Nairobi County Senator Johnstone Sakaja, who was representing Nairobi County Governor Mike Sonko at the event said as things stand, there are no plans to reduce the debt either by the National Government or counties.

“I know remitting employees’ funds to Laptrust is not a favour but a right. But I have not been briefed of any plans to settle the debt by the Governor right now. All I hope for is that when this political stalemate ends and the Senate starts getting busy, 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,” Mr Sakaja said.

Eliud Karithi, the National Chairman of County Pensioners Association said retirees are now worried of their plight if the debt is not settled.

“This debt will eventually kill the scheme. I blame the counties for not acting fast enough when they took over from local authorities,” Karithi said.

Sakaja said that the county administration is in full support of CPF’s current move to ensure a saving culture is instilled among pensioners as a measure to boost social security.

“I would like to declare my support for one key agenda that CPF has been publicly pushing – a good saving culture among pensioners,” Sakaja said.

CPF has previously called for the constitutional provision – Article 43 –  that currently only demands the State provide social security to its citizens, amended to compel Kenyans in both informal and formal employment to contribute to a new fund to be set up by the National Treasury.

Kili said only 15 per cent of Kenyans were covered by funds, out of Treasury’s target of 70 per cent. In the informal sector, only 10 per cent of workers in that sector are covered.

Business
Premium Financial hardships dampen Easter celebrations among Kenyans
Business
Premium Looming crisis as top lenders stare at Sh500b in bad loans
Business
Premium Water PS Korir put on the spot over Sh14m dam land
Business
Premium Ruto's food security hopes facing storm amid fake fertiliser scam