Treasury building. Photo www.nairaland.com
Kenya’s public pension bill is set to rise 29.1 per cent to Sh71.8 billion in the coming fiscal year, marking the first in a series of sharp increments that will see taxpayers fork out Sh104.4 billion in 2019/20 to keep retired civil servants comfortable in old age.Part of the pension time bomb build-up has been attributed to the government’s failure to push through necessary reforms, including kick-starting the long awaited contributory pension scheme.The time bomb has continued to grow despite the decision eight years ago to increase the retirement age from 55 years to 60 years.The move was meant to slow down the number of retirees entering the pension pool and offer the government some headroom to set up the contributory pension scheme, but the latest budget estimates show it has not reduced taxpayers’ burden.The estimates show that total payouts to retired, injured or deceased public servants and their dependants will rise from Sh55.6 billion in the current financial year to Sh71.8 billion in the next budget.At Sh71.8 billion, the amount is equivalent to about one per cent of the country’s productivity or gross domestic product (GDP) and dwarfs the Health ministry’s Sh61.6 billion allocation. The amount will then jump to Sh86.2 billion and Sh104.4 billion in fiscal 2018/19 and 2019/20 respectively, underlining the looming increase in the burden of the defined benefits scheme at a time when more civil servants have been hired to fill posts created by the 2010 Constitution.There is no pre-funding of the pension liabilities and the government runs the scheme on a pay-as-you-go basis using revenue collections.The bulk of the payouts are in the form of commuted pension –amounts pensioners elect to receive in lump sum— a choice that has minimised the benefit of drawing out the entitlements over years.Commuted pension, for instance, will rise from the current Sh28.5 billion to Sh37.7 billion in the next financial year while ordinary pension will jump from Sh26.8 billion to Sh33.8 billion in the same period.The entitlements are in various forms, including service pension and gratuity that fall due on fulfilment of certain conditions.