Retired public servants will get automatic pay raises based on the cost of living in pension computations if Parliament approves a proposed Bill.

The Pensions (Amendment) Bill 2024 seeks to amend the Pensions Act, Cap 189, to include an automatic cost of living adjustment to the pensions earned by all retired public servants.

The Bill seeks to cushion retirees from the effects of inflation.

“In addition, the Bill seeks to provide for the use of the most current salary applicable to a job group as the basis for the calculation of the pensions payable to public servants who have retired in that job group or its equivalent,” Matuga MP Tandaza Sawa, the sponsor of the Bill said in its memorandum of objects and reasons.

“An officer who has been in service of the government shall be entitled to an automatic cost of living adjustment increase to pension, gratuities, or other allowances issued under this Act, where the rate of inflation is high enough to substantiate a cost of living adjustment increase.”

The Bill seeks to amend the current law to require the automatic adjustment to be calculated based on an increase in the consumer price index within 12 months ending on June 30, in each financial year.

The Kenya Bureau of Statistics and the Treasury Cabinet secretary shall determine the consumer price index.

“The provisions of this section shall apply to an officer who has been in service of the government after the commencement of this section,” says the Bill.

“In this section, consumer price index means an index number that measures a change in the prices of goods and services purchased or otherwise acquired by households and which are used directly by a household to satisfy their own needs and wants.”

Mr Tandaza defines the cost of living adjustment as a change in income or benefits that corresponds with the current inflation rate.

“Subject to the provisions of any other written law, the most current salary applicable to the job group shall be the basis for computation of the pensions payable to an officer who has been in service of the government who retired in the job group or its equivalent,” Mr Tandaza said.

“An officer who has been in service of the government shall be entitled to an automatic cost of living adjustment increase to the pension, gratuities or other allowances issued under this Act, where the rate of inflation is high enough to substantiate a cost of living adjustment increase.”

The new proposal will also require the relevant Cabinet secretary to publish information on the automatic cost of living adjustment in a gazette notice.

The Bill comes in the wake of efforts to initiate measures to reduce the wage Bill. President William Ruto during the National Conference on the Third National Wage Bill Conference at the Bomas of Kenya said reducing the number of civil servants is among the options.

Dr Ruto said his administration is ready to make painful decisions for substantive reduction of the wage bill.