Some 12,290 public servants are set to retire this year, a development that will increase ordinary pension payments by Sh8.3 billion this financial year.
The National Assembly’s Public Debt and Privatisation Committee says the government will spend Sh189.09 billion on pensions expenditure in the financial year 2023/24. This is an increase of Sh16.45 billion from the fiscal year 2022/23 amount of Sh172.64 billion.
“This is mainly attributed to an increase in ordinary pension payments to Sh91.23 billion in the financial year 2023/24 from Sh82.93 billion in the financial year 2022/23 occasioned by an increase in the number of retiring public officers (12,290) particularly retiring civil servants and military personnel,” said the committee.
Further, the new financial year will see pensioners receive their next biennial pension increase at the rate of three per cent from this month. “Other factors include revised pension claims for teachers and anticipated new pension claims,” it added.
The growing number of retirees in public service has been increasing the public pension bill, further squeezing the budget.
A previous set of data from the Treasury shows retirees in public service stood at 19,300 in the financial year 2017/18 and projected the number to increase to 19, 800 in the year 2018/19 and further to 20, 300 in 2019/20.
To reduce its pension bill, the government in 2021 introduced the much-delayed contributory pension scheme for civil servants called the Public Servants Superannuation Scheme (PSSS).
The PSSS allows the portability of pension benefits, facilitating the free movement of staff into and out of the public sector, and is expected to eventually ease pressure on the pension wage bill.
Under this scheme, civil servants contribute 7.5 percent of their basic salary and the employer contributes 15 percent.
The PSSS along with the ordinary pension scheme account for 60 percent of total pension expenditures under Consolidated Fund Services expenditures.
“It is estimated that the budget for employer contribution to the PSSS declined by Sh3.4 billion due to a return to baseline from a spike in FY 2022/23 occasioned by reallocation to cater for outstanding employer contributions for the months of April, May, and June 2022,” observed the committee.
This comes at a time the Treasury has announced job cuts in public service to reduce its payroll and pension liabilities.
Treasury Cabinet Secretary Njuguna Ndung’u in his budget speech said many State agencies rely on the exchequer to service payroll and other expenses.
