Kenya: Pension payments nearly double in third quarter 2021

Kenya’s pension bill nearly doubled in the three months ended September compared to a similar period last year, highlighting the impact of the increasing number of retirees from public service.

The latest data from the Controller of Budget shows that Treasury spent Sh36.48 billion on retirees in the period, reflecting a 78.5 percent jump from Sh20.44 billion a year earlier.

The rise highlights Kenya’s growing pension burden due to an ever-increasing number of retirees from the Public Service.

Thousands of public servants were expected to exit this year, adding to the more than 60,000 who retired in the three years through June 2020.

The amount spent on retirees in the three months to September as a share of the expenditure of the Consolidated Fund Services (CFS) grew to 13.2 percent from 12.3 percent from similar last year.

Pension and gratuities, public debt, salaries and allowances are paid from the CFS.

Pension payments have in the last four years been rising on the increasing number of workers from the public service prompting roll-out of a contributory pension scheme for all public servants in a bid to ease the pain on the Exchequer.

The Treasury rolled out the Public Service Superannuation Scheme (PSSS) in January and injected Sh20.3 billion to kick start the scheme.

Government employees have since January had 7.5 percent of their monthly take-home cut for onward remittance to the PSSS.

The State matches the contributions with an amount equivalent to 15 percent of every workers’ monthly salary.

This is equivalent to about Sh6.9 billion monthly contribution or Sh55.87 billion annually, turning pension expenditures into one of the largest budget items.

Roll-out of the scheme ended a nine-year wait as the Treasury faced opposition in its bid to slice a portion of civil servants’ pay to start the PSSS.

Civil servants were unlike workers in the private sector not contributing to their pension, with their benefits paid straight from taxes.