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Tough economic times forcing retirees to work longer than their bodies can cope
John Macharia stared through a small window at Nakuru Girls High School, deep in thought.
He cut a forlorn figure as he followed the proceedings at the 20th Annual General Meeting (AGM) of the Local Authorities Pension Trust (Laptrust).
Lost in his own world with sweat trickling down his wrinkled face, he pondered the bombshell that thousands of shillings meant for members’ pension contributions had not been remitted.
As the reality slowly began to sink, it occurred to him that, after all, his ride off into the sunset would not be as smooth as he had thought. The pension contribution he had been making to enable him to live comfortably in retirement may not come and he may be forced to depend on other people for his daily upkeep.
“I’m getting older. I’m likely to become poorer after retirement in the next two years if the counties don’t remit our pension contributions. It means that after I stop working, I will plunge into poverty if I am not paid my dues on time yet my pension contribution is deducted every month,” Mr Macharia, who is a member of Laptrust, said.
He is one of the more than 15,842 active members of the Fund whose contribution has not be remitted by the counties. The scheme has 8,843 pensioners.
At least 44 counties have not submitted pension contributions for their members amounting to Sh33 billion.
The news struck like a thunderbolt and threw members off balance. The situation is so serious, such that some members such as Mr Macharia who are inching closer to retirement are contemplating looking for jobs to support their families once their term of service ends.
The high cost of living in the country has eroded the ability of many Kenyans to save any money or make any meaningful investments. This has left many retirees staring at poverty at the end of their employment.
It also means that elderly people will continue to work in order to afford their basic needs. This calls into question the adequacy of pension scheme payouts.
The increase in cases of unremitted pension contributions has left many retirees facing financial woes in their sunset years. Their close relatives and friends will be saddled with the burden of supporting them financially so they can afford food and pay bills.
County Pension Fund Group Managing Director Hosea Kili during an interview at his Nairobi office on November 2, 2017.
The Kenya National Bureau of Statistics (KNBS) quarterly jobs report showed that 776,159 out of 869,338 people above the age of 60 were in active employment in December 2022, representing 82.1 per cent of the senior citizens in the country.
The survey stated that many of those working were doing so to meet basic needs while another 6,881 above the age of 60 joined young graduates in actively looking for jobs.
The report states that workers above 60 years — Kenya’s contractual retirement age — increased by 7.7 per cent between March and December of 2022.
Nyeri Governor Mutahi Kahiga, who attended the AGM, said a former governor was shocked to learn that the administration he had been heading had not remitted his pension contribution to his retirement scheme.
Mr Kahiga said that his administration had inherited a historical debt from the four defunct local authorities including Nyeri County Council, Nyeri Municipal Council, Karatina Municipal Council, and Othaya Town Council.
According to the Nyeri County Assets and Liability Report of 2014, the total debt amounts to more than Sh592 million out of which more than Sh63 million was unremitted pension contribution.
The Nyeri County chief urged governors to put people’s welfare first, if not, “we shall face problems at the counties.”
“We need to think about the welfare of employees. In Nyeri, all employees are permanent and pensionable,” he said.
Deputy President Rigathi Gachagua said nobody needs to go back to work when they should be enjoying retirement.
“More than 82 per cent of our senior citizens above 60 years have gone back to work because of diminishing retirement benefits. Some 6,900 others are job hunting, competing with young graduates. This calls for enhancement of social protection mechanisms while in employment and upon retirement,” said Mr Gachagua.
He said the government is committed to strengthening social protection structures for the employees to reduce vulnerability in their sunset years.
“Kenya Kwanza administration is committed to reducing poverty in old age and the dependence ratio in our nation. There’s no dignity in dependency,” said the DP.
“Pension funds play a critical role in providing a safety net for our workers after years of dedicated service. These funds represent the hard-earned savings of individuals who have devoted their lives to the betterment of our nation. It is, therefore, our moral obligation to honour our commitment to our workers.”
Mr Ezra Ngoje, a pensioner, said that it is sad the counties are sitting on workers’ pension contributions.
“This is not a gift. Some pensioners earn Sh5,000, and when it the money is deducted, some take home Sh1,800. Some governors want to establish an association within Laptrust to ensure they get their pensions. By doing so they will forget about the ordinary pensioners. Governors should endeavour to pay the Sh33 billion owed to Laptrust and start their own association,” he said.
In April, the Senate County Public Investments and Special Funds Committee chaired by Vihiga Senator Godfrey Osotsi summoned 10 governors with the highest unremitted pension contributions and long-outstanding debts and the National Treasury Cabinet Secretary Njuguna Ndung’u over Sh50 billion owed to pension schemes by county governments.
Top on the list of defaulters includes Governors Johnson Sakaja (Nairobi), Abdulswamad Shariff (Mombasa), Ahmed Nadhif Jamma (Garissa), Ochillo Ayacko (Migori), Simba Arati (Kisii), Gladys Wanga (Homa Bay), Ahmed Abdullahi (Wajir), Wavinya Ndeti (Machakos), George Natembeya (Trans Nzoia) and Kawira Mwangaza of Meru owe. The counties owe Laptrust and Lapfund more than Sh1 billion each.
A detailed report on the pension schemes released by the National Treasury, shows the counties owe Laptrust more than Sh30 billion, the County Pension Fund (CPF) is owed Sh2.59 billion while the Local Authorities Provident Fund (Lapfund) is demanding Sh31.37 billion as of the end of January 30, 2023.
Nairobi City County owes pension schemes Sh39.66 billion of which Sh15 billion is owed to Lapfund, Sh32.86 million is owed to CPF and Laptrust Sh24.62 billion.
Mombasa has a debt of Sh9.44 billion which comprises Sh5.02 billion (Lapfund), Sh146.84 (CPF) and Sh4.27 billion Laptrust.
Garissa County is yet to pay pension schemes Sh1.83 billion. The debt includes Sh1.62 billion owed to Lapfund, Sh194.10 million (CFP) and Sh18.15 million (Laptrust).
Migori County has not paid three retirement schemes Sh1.73 billion which consists of Sh1.62 million (Lapfund), Sh31.44 million (CPF), and Sh79.87 million (Laptrust).
Kisii County owes Sh1.28 billion; Sh1.32 billion for Lapfund Sh101.77 million CPF, and Sh51.86 million for Laptrust.
The National Treasury report states that most of the county governments are not keen on reflecting the unpaid pension dues in their pending bills and debts.
CPF has more than 80,000 members while the CPF Individual Pension Plan scheme had 10,931 members as of the end of the financial year ended 2022.
However, it is not all doom and gloom as Nyeri, Nyamira, and Tana River remain steadfast in supporting the County Pension Fund by ensuring that their employees join the scheme and by paying all their outstanding debts.
“We celebrate these counties with a special award of Sh500,000 each. We‘re investing in the county on Nyamira by setting up an industrial park and in Tana River County we shall start an affordable Housing project,” the Group Managing Director and Chief Executive Officer of the three pension schemes, Mr Hosea Kili, said.
Kakamega County has enrolled over 6,000 members in CPF and pays Sh40 million per month to the scheme.
“Kakamega is an example of a good employer and we have agreed as a scheme to invest in building a county headquarters,” said Mr Kili.
“It is wrong for employees to retire empty-handed. Governors should ensure that the pension fund is remitted on time because they might find themselves in a dilemma when they also retire. As fund administrators, we are very worried because employees will not get their savings when they retire.”
Retirement Benefits Authority (RBA Supervision Manager Jackson Nguthu said the sector has witnessed tremendous growth and as of December 2022, the assets for the pension schemes countrywide were Sh1.6 trillion.
Kenya County Government Workers Union General Secretary Roba Duba said the Council of Governors should intervene and change the debt into bonds.
Cabinet Affairs Principal Secretary Julius Korir, a trustee of the schemes said: “Those responsible should develop a programme to remit the contributions so that workers can reap the benefits of what they have invested over the years.”
