• The pension budget increased more than three-fold over the past 10 years, from Sh25 billion in the 2008/9 financial year to Sh86 billion currently.
• A rapidly growing pension budget is likely to derail government’s efforts to shift public spending to development projects.
Image: FILE
The State’s pension budget has ballooned over the past 10 years, eating into funds that would have otherwise gone into infrastructure development.
Since independence, public workers have enjoyed free retirement benefits that are fully paid for by taxpayers through the Consolidated Fund.
The problem has continued to grow despite the decision 10 years ago to raise the retirement age from 55 to 60 years.
The move was meant to slow down the number of retirees entering the pension pool and offer the government some headroom to set up the contributory scheme, but the latest budget estimates show the move has not reduced taxpayers’ burden.
In his budget statement, Treasury CS Henry Rotich noted the pension budget was becoming unsustainable having increased more than three-fold over the past 10 years, from Sh25 billion in the 2008/9 financial year to Sh86 billion currently.
“Between February and May 2019, we conducted a payroll cleansing exercise for pensioners and dependants at the Huduma Centres across the country, to authenticate the approximately 270,000 recipients of monthly pension paid by the government,” he said.
The exercise conducted by the Pensions Department revealed that taxpayers had been paying billions to non-existent pensioners after the cleansing revealed about 40,000 retired civil servants who had already passed on were still on the government’s payroll.
The exercise resulted from the need to reduce government’s spending on the pension budget which is expected to grow by 21.4 per cent in the coming financial year to Sh104.4 billion.
This means taxpayer funds were being used to pay relatives and dependants of the deceased retirees.
According to the Pensions Department, this has been made possible through the digitsation of banking systems, omitting the need for a beneficiary to be physically present to collect their pension.
A rapidly growing pension budget is likely to derail government’s efforts to shift public spending to development projects including building roads, ports, railways and power plants, among other productive sectors that boost economic growth.
Last Thursday, Rotich said the government was finalising the cleansing process adding improved pension management would be expected with the migration to Integrated Financial Management Information System (IFMIS) which commenced last month.
“We are finalising the analysis and we expect cost savings,” he said.
The Auditor-General, in a 2015 report, warned that advancement in the banking sector and an aging pension payment system had made it difficult for Kenya to maintain a clean retirees’ payroll, leading to the loss of billions of shillings in taxpayers’ cash.
The AG found 12,000 false names on the State payroll, noting more than Sh100 million a month was being lost in payments to “ghost workers”.
A survey by Infotrack Research & Consulting showed only one in 10 Kenyans belongs to an individual pension scheme other than the National Social Security Fund which is compulsory.
Respondents cited the government not doing enough to increase uptake of pension among young people and high levels of corruption in the country’s financial institutions as key hindrances for growth in pensions.
Yesterday, the County Pension Fund (CPF) and Kenya Young Members of County Assembly (KYMCA) signed a Memorandum of Understanding to enable the roll-out of a financial literacy campaign to bridge the existing gap in financial knowledge and skills among the youth in Kenya