Battle over counties’ pension billions heads to Parliament

Parliament building in Nairobi

A row is brewing between the National Treasury and a pension fund administrator over the control of billions of shillings in pension deductions from employees of county governments.

The battle, which is being fought on the floor of Parliament, has seen Local Authorities Pensions Trust (Laptrust) – one of the pension bodies for Members of County Assemblies (MCAs) and employees of county governments – sponsor a private members bill in the National Assembly, seeking to dissolve Laptrust’s competitor Local Authorities Provident Fund (Lapfund) and take over its role as the sole administrator of all the 47 counties’ pension emoluments.

Laptrust’s  County Pension Bill 2017 is currently before the National Assembly’s Departmental Committee on Finance.

If it sails through, Laptrust will have executed an ingenious coup d’état against Lapfund, installing itself as the sole custodian of retired county employees’ benefits.

Currently, Laptrust has a combined value of about Sh40 billion and has a membership of about 40,000 across all counties across, according to records on their websites. Lapfund, on the other hand has an estimated membership of 34,000 and a net value of about Sh30 billion.

County employees, who are members of one or the other schemes, contribute at the rate of 12 per cent of their pensionable salaries while the county governments contribute 15 per cent on their behalf.

According to National Treasury Cabinet Secretary Henry Rotich, the State has always rooted for only one universal pension scheme for all county employees in a move that would abolish the two competing schemes. But the plan on how to achieve that goal has always been a bone of contention. Laptrust, through its County Pension Bill 2017 wants Lapfund dissolved and a County Pension Scheme formed under its command.

Laptrust also wants the operations of the new scheme put under the Ministry of Public Service instead of the National Treasury. The proposal has irked Treasury.

Bring uniformity

Laptrust Chief Executive Officer (CEO) Hosea Kili defended the move to take over the County PensionScheme, saying it is the only way to bring uniformity in membership of county employees to a single scheme.

“We cannot divide county employees in different schemes while we can have a single one which serves all their purposes. That is why we are behind the County PensionBill 2017,” Mr Kili told the Financial Standard.

Lapfund, however, feels Laptrust is insincere in its proposal and is only out to establish a monopoly in the administration of county pension funds.

In a letter to the clerk of the National Assembly seen the Financial Standard, Lapfund Chief Executive David Koross insists the proposal is only meant to financially benefit Laptrust and nothing else.

“The bill is seeking to close Lapfund scheme to new members. If passed, it will dissolve Lapfund, a State corporation by operation of the Law in contravention of Section 28 provisions of the State Corporation Act,” reads Koross’s letter to parliament in part. “The dissolution would also be against the advice of the Committee on Implementation of the Constitution and the Presidential Taskforce on Parastatal Reforms to transition it as a pension scheme for county employees. The bill is creating confusion and has the potential to cause chaos within the membership,” he observed.

Lapfund boss says the bill seeks to advance selfish interests of Laptrust and its affiliated companies without due regard to the best interests of members. CS Rotich has also voiced his opposition to Laptrust’s Bill, dismissing it as a ‘money bill’.

Recently, while making his submissions to the National Assembly Departmental Committee on Finance and Planning, CS Rotich said there was no way one individual administrator could hold all the management positions of a new universal scheme for the counties.

“The Laptrust Bill has not gone through sufficient stakeholder consultations as required under Article 10 of the constitution,” Rotich said.

The CS told the committee that the inter-governmental Budgetary and Economic Council had recommended that the National Treasury do an all-inclusive bill that takes into consideration interests of all the players involved in county pension.

The move is meant to end the current confusion and competition between the other two schemes.

The task of coming up with that kind of bill was put forward to Nairobi Senator Johnson Sakaja with blessings from Treasury. Senator Sakaja has now created a new bill dubbed the County Governments Retirements Scheme 2018. His bill, which has been opposed by Laptrust, proposes that both antagonists – Lapfund and Laptrust – be dissolved and a new universal scheme be formed that will become mandatory for all county employees to gain membership.

The scheme will be firmly in the hands of Treasury and neither Laptrust nor Lapfund will have any interest in it.

Sakaja’s Bill is in the second stage reading in the Senate and has received approval from the Council of Governors, the Salaries and Remuneration Commission as well as the Retirements Benefits Authority.

The fight for control of county pension billions comes at a time when county governments owe both Lapfund and Laptrust Sh30 billion in unremitted employee contributions. The debt, which has ballooned from Sh6.2 billion when county governments came into office to replace local authorities, has created a big headache for both schemes that are now facing dissolution if Sakaja’s bill is passed into law.

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