Government’s pension expenditure for the 2023/2024 financial year will amount to Sh189.09 billion, Parliamentary Budget Office report shows.
The report said the amount will be an increase of Sh16.45 billion from the Sh172.64 billion expenditure on pension in the 2022/2023 financial year.
"Primary driver of the increase continue to be the financial impact of the Public Servants-Annuation Scheme that was introduced in 2021 as a contributory pension scheme for public servants where civil servants contribute 7.5 per cent of their basic pay and the employer contributes 15 per cent,” the report explained.
The scheme was intended to ease the pension burden by having a contributory pension scheme which could not only yield better returns to retirees but also ensure prompt payment upon retirement.
"The rising pension bill has often resulted in delays in payment to eligible public servants upon retirement," the report said.
It added that it is, therefore, imperative that the management of the scheme be oversighted to ensure the allocation is prudently managed and the the beneficiaries get the best returns for a dignified life in retirement.
The report further notes that the PSSS Act requires government to take life insurance policy against death and permanent disability for members of the scheme equivalent to five of a pensioner’s annual benefits.
The report pointed out that there has been a reduction in allocation to PSSS from Sh31.9 billion in 2022/2023 period to Sh28.46 billion in the 2023/2024 financial year.
It said a reduction in the PSSS allocation is unusual since it represents the employer contribution to the scheme.
"Given the increasing number of new employees under the age of 45 years who are eligible to be part of the scheme and the increment in annual salaries, it is expected that this allocation should be on an upward trend," the report states.
It says more information is needed from the National Treasury to explain the reduction.
