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Crisis as parastatals fail to remit pension deductions
Cash-strapped parastatals have failed to remit employees' monthly deductions to pension schemes.
Thousands of workers in cash-strapped parastatals risk retiring empty-handed after their employers failed to remit monthly deductions to pension schemes, the National Treasury has warned.
The Treasury, in the latest disclosures says struggling state-owned entities had not remitted nearly Sh42.06 billion in employer contributions at the end of last financial year.
The pension crisis, Treasury wrote in the 2024 Budget Policy Statement, poses “a huge challenge to the social security of the pensioners who may retire without a pension”.
Unremitted employer pension contributions are listed as the second biggest pending bills for the parastatals after arrears owed to suppliers of goods and services and contractors.
Late remittance of pension deductions is penalised in Kenya at the rate of five percent of the outstanding amount every month the sum remains unpaid.
Treasury data shows pending bills held by parastatals stood at Sh443.6 billion as of June 2023, a figure which rose to Sh448.4 billion last December.
The Pensions Department at the National Treasury estimates that 85,400 public service workers will retire by the financial year ending June 2026.
Some 30,155 workers are expected to leave work by June 2024, with the number expected to fall to 28,745 in the year that follows and 26,500 thereafter.
The pension bill towards payment of gratuity (paid in lump sum), ordinary pension (remitted monthly), and contribution to the public service retirement scheme is forecast at Sh625.55 billion in three years.
The Treasury has budgeted Sh189.09 billion towards pension expenses in the current year, a value which will climb to estimated an Sh207.85 billion in the 2024/25 financial year and further to Sh228.61 billion in the fiscal year that will follow.
Treasury data shows the Pensions Department had processed claims totalling Sh59 billion in seven months through January 2024, about 31.2 percent of the full-year target.
The pension expenses triggered by the mass retirements, which have also brought to the fore a job crisis in the ageing civil service, have joined debt expenses in denying the Ruto administration funds it needs for priority projects like roads, affordable housing units, and power transmission lines.