Pension scheme for civil servants jumps to Sh41bn in 18 months

By Steve UMIDHA

Some 368,795 civil servants have free-willed over Sh41 Billion in 18 months to the contributory pension scheme for government officials called the Public Service Superannuation Scheme (PSSS), a new data show.

The scheme’s membership shot from 330,318 in its introductory month in January 2021 when the government introduced PSSS as the preferred savings and retirement Scheme in the Public Service Sector to facilitate free movement of staff in and out of the sector.

Under this scheme, public service workers contributed two per cent of their gross pay towards retirement savings when it launched, rising to five per cent in 2022 and 7.5 per cent presently.

The employer, which is the government, contributes 15 per cent of the gross pay.

PSSS along with the ordinary pension scheme, account for 60 percent of total pension expenditures under Consolidated Fund Services Expenditures – whose existence keeps the national government and the county government running.

Its creation was also aimed at reducing the State’s mounting pension wage bill which stood at Sh 145 Billion as of July last year.

“The scheme’s contributions grew to Sh41,418,455,563.40 by the end of June 2022, and the membership grew from 330,318 in January 2021 to 368,795 in June 2022. The scheme also presented a healthy investment performance amounting to Sh2,892,087,648, and enhanced member services,” noted the acting Chief executive of PSSS Alice Nyariki, during the scheme’s inaugural annual general meeting (AGM) last Friday.

Further stating that, “The scheme also presented a healthy investment performance amounting to Sh2,892,087,648, and enhanced member services. PSSS is strategically positioned as the preferred savings and retirement Scheme in the Public Service Sector.”

Pension funds are pooled monetary contributions from pension plans set up by employers, unions, or other organizations to provide for their employees’ or members’ retirement benefits.

PSSS like all pension funds are the largest investment blocks in most countries and dominate the stock markets where they invest.

Upon maturity, the pension funds are paid on a lump sum or monthly basis.

The provident fund provides members with a cash lump sum and interest of the pension savings. On the other hand, upon retirement, a beneficiary can have access to a third of the funds as a cash lump sum and the two-thirds is paid on a monthly basis.

Kenya’s pension’s payroll has been soaring in recent years on the back of a fast-ageing public service, piling pressure on taxpayers amid delays in implementing reforms in the past. It is estimated that about 21,000 civil servants retire every year.

Treasury figures through the pensions department, show that a total sum of Sh54.48 billion was paid to retired civil servants in nine months to march this year compared to Sh95.4 billion in a similar period a year earlier.

That drop in delayed payment of fresh retired civil servants was occasioned by a cash squeeze which led to late disbursement of state pensions.

Current level of pension coverage in Kenya to the total labor force is approximately 20 percent, according to the International Organization of Pension Supervisors, which consists of occupational schemes, individual schemes, umbrella schemes, civil service schemes and the statutory National Social Security Fund (NSSF).

The national treasury puts that percentage at 22 percent, in its 2023/24 budget figures read last month.

“This underscores the need to extend pension coverage to the informal sector, which constitutes the majority of our workforce,” said Treasury CS Njuguna Ndung’u in his budget statement, when he pledged through the ministry, “to invest in modern technology and digital solutions to streamline pension process and improve service delivery.”

“The government continues to implement the public service Superannuation Scheme with the end goal of easing the burden of pension payment by the government,” offered Ndung’u.

 

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