Some 368,795 civil servants have contributed over Sh41 billion in 18 months to the Public Service Superannuation Scheme (PSSS), a new data show.

The scheme’s membership shot from 330,318 in its introductory month in January 2021 when the government introduced PSSS as the preferred savings and retirement scheme in the public service sector to facilitate free movement of staff in and out of the sector

Under this scheme, public service workers contributed two per cent of their gross pay towards retirement savings when it launched, rising to five per cent in 2022 and 7.5 per cent presently. The employer, which is the government, contributes 15 per cent of the gross pay.

The defined contribution scheme along with the ordinary pension scheme, account for 60 per cent of total pension expenditures under Consolidated Fund Services Expenditures – whose existence keeps the national government and the county government running.

Pension wage bill

Its creation was also aimed at reducing the State’s mounting pension wage bill which stood at Sh145 billion as of July last year. “The scheme’s contributions grew to Sh41,418,455,563.40 by the end of June 2022, and the membership grew from 330,318 in January 2021 to 368,795 in June 2022,” noted acting PSSS Chief executive Alice Nyariki, during the scheme’s inaugural annual general meeting (AGM).
The scheme also presented a healthy investment performance amounting to Sh2,892,087,648, and enhanced member services,” she added.

Alice Nyariki said the scheme also presented a healthy investment performance amounting to Sh2.8 billion and enhanced member services, adding that PSSS is strategically positioned as the preferred savings and retirement Scheme in the public service sector. Pension funds are pooled monetary contributions from pension plans set up by employers, unions, or other organisations to provide for their employees’ or members’ retirement benefits.

PSSS like all pension funds are the largest investment blocks in most countries and dominate the stock markets where they invest. Upon maturity, the pension funds are paid on a lump sum or monthly basis. The provident fund provides members with a cash lump sum and interest of the pension savings.
On the other hand, upon retirement, a beneficiary can have access to a third of the funds as a cash lump sum and the two-thirds is paid on a monthly basis.

Kenya’s pension’s payroll has been soaring in recent years on the back of a fast-ageing public service, piling pressure on taxpayers amid delays in implementing reforms in the past. It is estimated that about 21,000 civil servants retire every year.

Treasury figures through the pensions department, show that a total sum of Sh54.48 billion was paid to retired civil servants in nine months to march this year compared to Sh95.4 billion in a similar period a year earlier.

That drop in delayed payment of fresh retired civil servants was occasioned by a cash squeeze which led to late disbursement of State pensions.

Current level of pension coverage in Kenya to the total labour force is about 20 per cent, according to the International Organisation of Pension Supervisors, which consists of occupational schemes, individual schemes, umbrella schemes, civil service schemes and the statutory National Social Security Fund (NSSF).
The National Treasury puts that percentage at 22 per cent in its 2023/24 budget figures read last month.

Digital solutions

“This underscores the need to extend pension coverage to the informal sector, which constitutes the majority of our workforce,” said Treasury Cabinet Secretary Njuguna Ndung’u in his budget statement, when he pledged through the ministry, “to invest in modern technology and digital solutions to streamline pension process and improve service delivery.”
“The government continues to implement the public service Superannuation Scheme with the end goal of easing the burden of pension payment by the government,” he said.

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