SRC seeks to slash retirement benefits to trim public wage bill

 

Senior couple together on the beach [Courtesy]

Civil servants are staring at reduced retirement packages as the Salaries and Remuneration Commission (SRC) starts reviewing the long-standing benefits to trim the ballooning pension bill.

SRC wants to overhaul all the current public service retirement benefits laws and come up with new guidelines benchmarked against the private sector and other countries.

It is seeking for a consultant to carry out the review in six months starting April, and use the findings to come up with new structures for compensating retiring civil servants.

“The consultant shall be required to develop policy guidelines for streamlining the management and administration of retirement benefits in the public service” says SRC in tender documents.

“The need to undertake the exercise is key to managing the pension bill to ensure its affordability and fiscal sustainability and in addressing the existing disparities in provision of retirement benefits to ensure the benefits are harmonised, fare and equitable.”

The review marks SRC’s latest attempt at trimming the country’s wage bill, given that it is also working on a review to cut allowances to bring down the workers’ overall compensation.

The National Treasury expects to spend Sh146 billion on servicing pension in the financial year starting June 2022.

The planned spending is five times higher than the Sh27.7 billion that taxpayers paid eight years ago, pointing to the rising burden to sustain the public workforce in its sunset years.

Treasury’s latest disclosures show that its pension department is currently servicing dues of about 300,000 pensioners, with new claims hitting 20,000 annually.

Mass retirement of public servants, especially in the last three years, has worsened the situation and kept the pension bill on growth trajectory. For instance, in three years to June 2020 nearly 60,000 public servants retired.

About 20,300 workers exited in the year ended June 2020 compared to 19,800 and 19,300 in 2018-19 and 2017-18 respectively.

SRC’s brief on the scope of work shows the consultant will review all the existing laws and regulations, policies and practices governing public service retirement benefits and offer a guide on overhauling them.

Identify gaps

The consultant will carry out studies on what public servants in select countries earn in retirement and propose ways SRC can align Kenya to such packages.

The review will also identity gaps and disparities such as the difference between retirement packages for employees serving in national and county governments. 

It comes at a time Kenya has also transitioned into the Public Service Superannuation Scheme where all civil servants are paying part of their pension as is the case with private sector.

The State had as far back as 2008 tried to transition from a non-contributory scheme to a contributory one until January last year when this became a reality.

The two measures, together with the law to cap allowances at not more than 40 per cent of basic salaries, present a twin effort to lower the public wage bill.

Treasury is seeking to trim billions of shillings from the public sector wage bill as part of a deal with the International Monetary Fund to free up more money for development needs and cut debt exposure.

Kenya spent Sh827 billion on wages in the financial year ended June 2021, with allowances taking up about 48 per cent of the spending.