Light at the end of the tunnel? Windy pension push by 629 bank retirees
The retirees had hoped to get some solace in their retirement perks to keep them going.
What you need to know:
- Former employees of the lender won the battle last year when the tribunal ordered the bank’s retirement benefits scheme to recalculate their benefits.
- The pensioners sued their former employer and the Standard Chartered Bank Kenya Pension Fund accusing them of reducing their lump sum payment.
It has been decades of seemingly endless frustration for a group of 629 retired bank employees who left formal jobs in the 1990s.
Out of work, they had hoped to get some solace in their retirement perks to keep them going but that has remained on paper following disagreement over their rightful pay and mode of calculation.
“They must have retired with the hope that they would access their retirement packages when they left the bank. This was not to be,” High Court judge John Chigiti said while highlighting the plight of the former employees of Standard Chartered Bank who retired from the lender in the 1990s and have been pursuing their pension dues over the years unsuccessfully.
In a decision on the matter, the judge said the best the justice system can do for them is to ensure that they enjoy their pension and retirement benefits without having to spend years in court pursuing their dues.
“The 1st respondent’s (Retirement Benefits Appeal Tribunal) decision brought their dreams closer home when the tribunal issued the structural interdicts which accords with the social transformation through access to justice vision, and this court has a duty to promote this vision,” the judge said.
With the decision, the retirees hope they will soon be getting their dues, unless the lender decides to escalate the matter to the Court of Appeal.
The former employees of the lender won the battle last year when the tribunal ordered the bank’s retirement benefits scheme to recalculate their benefits, after finding that their amounts were reduced as a result of using the wrong actuarial factors.
The tribunal had agreed with them that the bank’s pension fund used the wrong procedure in calculating their terminal dues, which resulted in lower pay.
It said the former workers had a legitimate expectation that the calculation of their benefits would be done based on documents supplied by the bank to the scheme and not the new reduced actuarial factors, which were applied.
“While this tribunal does not find that there was a fraudulent misrepresentation, this tribunal is persuaded that there was misrepresentation, concealment, and non-disclosure of actuarial factors the scheme intended to use in the calculation of the appellants’ benefits from those provided to the appellants at the time material to the dispute,” the tribunal stated.
Trustees of the scheme appealed against the decision before the High Court stating that by directing them to compute the benefits, the tribunal abdicated its adjudicative role and delegated it to the trustees and the bank, yet they were parties in the proceedings.
According to the scheme’s trustees, the judgement would still require further proceedings and orders for the process to be implemented by the Tribunal as any dispute that may arise on the computation of benefits would still be referred before it.
“Such an action would result in grave procedural impropriety and lead to illegality by the tribunal’s further assumption of appellate power without jurisdiction,” the scheme submitted.
Further, the trustees submitted that to require the scheme to compute the benefits by the Retirements Benefits Act and regulations and at the same time directing the same to be re-calculated based on the two unsubstantiated documents, is unlawful and contradictory.
Justice Chigiti dismissed the petition and said he found nothing wrong with the tribunal’s decision.
“It is my finding and I so hold that the tribunal did not abdicate nor delegate its statutory power when it issued the structural interdicts which are in keeping with principles of structural interdicts as enunciated,” the judge said, adding that the decision was conclusive, legally sound and capable of being enforced.
Evidence tabled in court was that the fund was established on June 3, 1975, to provide pensions on retirement and other benefits to the employees of the bank.
The trust deed was amended on various occasions latest one being on January 1, 2006. A newly defined scheme was established in 1999 as a separate section of the earlier scheme, under the existing arrangement and governed by the existing trust deed rules.
The pensioners sued their former employer and the Standard Chartered Bank Kenya Pension Fund accusing them of reducing their lump sum payment, by using incorrect actuarial factors in computing cash values for both the deferred pensioners and commuted values for immediate pensioners.
They claimed that they sought Sh9 billion as the balance of lump sum pension benefits and interest plus a refund of Sh1.1 billion, which was paid to the bank as surplus, which they said totaled Sh5.79 billion.
According to the trustees, the new contribution scheme was set up to provide pension benefits on a defined contribution basis, for the actively employed members who were transferred to the new scheme.
But the scheme said the other members of the first scheme did not transfer their pension or deferred pension to the new scheme but allegedly remained in the defined benefit section with their benefits, which crystalised at the time they left the bank on the same terms and conditions and without any loss.
The bank said it created a new defined scheme in 1999 as a section of the Trust Fund established in 1975, which absorbed all existing employees leaving those who had already retired with the old terms and conditions. In 2006, the lender separated the schemes with the agreement of all eligible employees.
The trustees added that with the establishment of the second scheme, the first one was deemed to have become redundant because it was incapable of taking in new members.
New employees of the bank effectively became members of the second scheme and the first scheme members remained active only for purposes of honouring its obligations to existing pensioners and deferred pensioners, the trustees said.
The court heard that the retirees left employment before the normal retirement age and actuarial factors applied to the deferred pensions for the former workers were used to determine the cash lump sum in lieu of the deferred pensions.
According to the trustees, a member is not eligible to pension before normal retirement age save for incapacity and ill-health, and the pensioners were paid under the scheme rules and the correct actuarial factors were used in the computation of their dues.
A majority of them were terminated before the conversion on January 1, 1999, and paid a lump sum or had their benefits transferred to an insurance company and were therefore not affected by the conversion to a defined contributory scheme, which they alleged reduced their benefits.
The court was informed that the pensioners did not provide actuarial valuations of 1997 and 2000 to justify their claims.
Further, the cost of living adjustments to pension payment and the provision for housing allowance did not feature in the 1975 trust deed rules, the applicable rules when most of them left their jobs.
