Pension obligations for the Kenyan government are ballooning at an alarming rate, now estimated at Ksh2.6 trillion or close to 30 percent of the GDP.
According to the International Monetary Fund (IMF), the current obligation do not match the savings, with the current taxes collected averaging Ksh1.5 trillion per year.
In 2009, the government tried to delay the pension obligations by pushing the retirement age from 55 to 60, but this seems to have caught up with the government, with the cost of settling pensions raising by 600 percent in the last 15 years.
It is estimated that at least 20,000 civil servants retire every year, a development that has seen pension payments raise to Ksh104 billion in 2019 from Ksh86 billion in 2018.
“There is potentially significant risks associated with sustainability of the pension scheme. The government has not undertaken a full actuarial valuation of the future obligations of its non-contributory defined benefits pension fund scheme,” notes IMF.
According to IMF, in 2018, the present value of pension was Ksh819 billion, but the government has severally failed to disclose its pension obligations.
IMF requires that the country changes from paying pension from taxes and form a contributory scheme. The government is said to be preparing to gazette the Public Service Superannuation Scheme (PSSS) Act 2012, that will requir public servants to contribute towards their pension savings in four months.
In the Act, civil servants will contribute 7.5 percent of their monthly pensionable salaries towards retirement.
Currently, under the National Social Security Fund (NSSF) workers contribute Ksh200 towards their pension, which is inadequate towards any pension scheme.