How to ensure workers receive and enjoy retirement benefits

Hosea Kili

Mr Hosea Kili, Group Managing Director of County Pension Fund and chairman of the Association of Pension Trustees and Administrators of Kenya.

Photo credit: Courtesy

What you need to know:

  • The administration of pension funds has been a source of conflict among Kenyans and government.
  • Mobile money now allows pension funds and social protection programmes to reach more geographically isolated areas.

Pension funds hold a lot of money for investments, currently estimated at over Sh1.2 trillion. How can the players in the pension industry spur economic development in the country using these funds? Hope Kalekye, Machakos County.

There is need for amendments to the RBA regulations and the Public Finance Management Act to enable government to engage public pension funds directly to invest in infrastructure projects. This might require the creation of an Asset Class for Infrastructure Financing.

Instead of pension funds lending money directly to government through Treasury bonds as is the case now, they can carry out these projects directly. This will naturally attract more funding from external pension funds, especially from developed countries, who are looking for investment avenues.

Indeed, pension funds can undertake a range of infrastructure projects, including railway lines, health facilities, ports and roads. It has been done elsewhere in the world. Government then pays over a long period of time, through guaranteed instruments.

There was confusion at one time as to who between your pension body and LAP-Fund actually ought to represent employees of County governments. Was that matter concluded and is there clarity today? Githuku Mungai, Nairobi.

We are on different lanes and there should be no confusion at all. LAP-Fund is a provident fund while CPF and the Laptrust scheme are pension funds. 

Earlier this year the National government rolled out the new Public Service Superannuation Scheme (PSSS) for Civil Servants, Teachers and Disciplined Forces targeting those aged 45 years and below. Sir, as a pension administrator, what's your take on the scheme as compared with the previous one? Komen Moris, Eldoret

I think this is a move in the right direction by government. The PSSS, being a funded scheme (where members contribute towards their pension), is going to reduce government liability in the long run. 

Many trade unions have complained of continuous delays in remittances of pension deductions from workers’ salaries, especially in government institutions such as universities. Delayed remittances of pension deductions negatively affect the employees’ egg-nest.

Pension gives you higher returns when invested over a long period of time, and therefore delays impact on employee’s benefits in some instances. I’d, however, like to note that this challenge has been previously highlighted by the Association of Pension Trustees and Administrators of Kenya (APTAK) to Policy makers and I am glad to note that a new law giving RBA and KRA authority to collect such delayed remittances on behalf of Trustees has now come into play. We are likely to see changes in the behaviour of employers.
 
The 50-storey G48 Ugatuzi Tower is set to consume billions of shillings during its construction and some individuals claim it is a waste of pensioners’ funds. What is your position on this? Victor Gichuru, Ngong Town.

The G48 is an investment similar to other buildings, put up by pension funds but occupied on lease by the employers. Examples abound, including KCB Towers in Upper Hill, put up by KCB Pension; Absa Towers; and CBK Pension Towers.

County governments are the main sponsors of the County Pension Fund and, therefore, as part of meeting their infrastructure needs for liaison offices as well as other government agencies handling devolution matters, the scheme will put up the G48 office tower as an investment. Members will earn a premium return.

To ensure no default in payments by occupants, the commitment documents signed with the county governments and government agencies who will take up the space will be lodged with the Office of the Controller of Budget to guarantee payment of collections. 
 
The merger of three pension schemes covering county government workers was not received very well by a majority of stakeholders. What is the bone of contention and what is the way forward? Paul Mbugua, Nairobi.

The merger of the pension funds serving county governments is a very good idea, but the law that was meant to actualise that has various issues, including the constitutionalism of the Act in its establishment as a state corporation as opposed to a statutory Trust, non-representation of some key stakeholders in the Board of Trustees, loss of benefits for members, and conflict with the RBA Act in many instances. It is our hope that all stakeholders will agree and resolve the various issues before the same is implemented.
 
Some time back you were quoted as suggesting that government should introduce a basic contributory pension by government to realise mandatory state social security. Would you mind shedding more light to the proposal? Given the difficulties that have been noticed with the implementation of the universal health coverage, how would your proposal avoid the pitfalls? Faith Muli, Nairobi County.

We at CPF have been big proponents for universal social security in Kenya. This is because we believe in universal social protection as a key element of national strategies to promote human development, political stability and inclusive growth. In fact, evidence shows that, in addition to reducing poverty and inequality, well-designed social protection systems with adequate benefits contribute to inclusive economic growth of a nation.

It will also provide a greater pool of funds, which can be used for infrastructure development in the long term. Every developed country has a basic mandatory pension. I am happy to see the NHIF Bill is advocating for contribution by both employer and employee. Shared responsibility is the way to go. I am still pursuing this as I strongly believe it will greatly reduce old age poverty among our people.
 
A lot of people confuse CPF Financial Services and the pension funds it manages. What is the difference and why is the structure you're operating on necessary? Mickey Mburu, Kiriyanga County. 

CPF Financial Services is a corporate administrator, administering the County Pension Fund, Laptrust and the CPF Individual Pension Plan (IPP). The company is jointly owned by the three pension funds. Having a corporate administrator is common practice where you have more than one pension funds to manage under one roof. It ensures separation of roles, good governance practices and efficiencies in operations. 
 
How can technology be used to leverage the adoption of social security measures that provide cover to the under privileged Kenyan worker? Marcus Muli, ICT enthusiast.
From our experience at CPF, ICT automates and improves data management, reducing workloads and enabling us to make decisions that are more informed. ICT also provides convenience and faster service delivery to our members.

Mobile money now allows pension funds and social protection programmes to reach more geographically isolated areas. We at CPF have leveraged technology and digital solutions powerfully to pool savings through our M-pension platform, as well as in the monthly payment of our pensioners.

Additionally, we effectively harnessed the capabilities of our Electronic Document Management System to gather and store data and used this system hand in hand with biometrics to ensure that we enhance efficiency in our operations. Our proposal is for the proposed universal pension fund to leverage digital platforms to avoid expensive infrastructure set up.
 
In your recent AGM, it emerged that the Laptrust and County Pension Fund are owed money by county governments amounting to Sh29 billion. How do you intend to resolve that situation? Lydia Mwangi, Kiambu County.

It is true that we continue to grapple with the challenge of outstanding unremitted contributions, like many other statutory institutions. One option we wish to put forward is for government to consider offloading some of its holding in some profitable corporations such as KenGen, Kenya Power, Safaricom, and KCB in the form of shares to settle outstanding debt. Issuance of a special bond is also a viable option for debt settlement by governments. The new law that allows KRA and RBA to spearhead collection of unremitted contributions will also go a long way in easing this burden for pension funds.
 
Most Kenyan workers are deprived of a decent pension or retirement benefit once they stop working. What measures have you put in place to ensure this does not happen to your members? Yusuf Juma, Mombasa County.

Our aim has always been to achieve an appropriate balance between risk and return and minimise potential adverse effects on the Funds’ financial performance. Our risk management policies identify and analyse these risks, set appropriate risk limits and controls, and monitor the risks and adherence to limits by means of reliable and up-to-date information systems. At CPF, we regularly review our risk management policies and systems to reflect changes in markets, products and emerging best practice. 

Next week: Mr Collins Oyuu, the secretary general of the Kenya National Union of Teachers (Knut)

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