Details on the new Pension scheme for teachers and other civil servants that is set to be rolled out in January 2021.
Details on the new Pension scheme for teachers and other civil servants that is set to be rolled out in January 2021.

The 7.5% Pension scheme for teachers; Kuppet issues statement

The Kenya Union of Post Primary Education Teachers – KUPPET, has weighed in on the impeding introduction of the Superannuation pension scheme. The union seems to be warming up to the idea, if the recent communique is anything to go by.

The new scheme targets all civil servants ant teachers (employed on permanent and pensionable terms by the Teachers Service Commission, TSC).

Past attempts by the government to implement the scheme had flopped. But, it is now almost certain that it will be rolled out in January, 2021.

As opposed to the current pension scheme (where the government shoulders full payment responsibility), in the new scheme both the employer and employee will contribute equally.

STATEMENT BY KUPPET ON THE CONTRIBUTORY PENSION SCHEME.

Here is the presser by Kuppet Secretary General, Akello Misori;

“Following the Government’s intention to operationalise the Public Service
Superannuation Scheme (PSSS), KUPPET will give its views to the Teachers
Service Commission, the Ministry of Education and the National Treasury at
the appropriate time.

The PSSS has been in the planning for many years. Its goal is to shift public
servants including teachers from the current pension plan used by the government – which is known as the defined benefits plan – to a defined
contribution system (DCS).

Under the current plan, retired teachers earn a guaranteed pension based on a formula that factors in a teacher’s last income in service and the length of
service.

The TSC takes full responsibility for funding and investing the money in the plan. At retirement, a teacher gets a one-off gratuity and monthly pensions
based on individual calculations.

The main challenge of the system has been that the government does not
invest in pensions, which are paid from tax revenues, hence the trouble many
public servants have faced in accessing their pensions after retirement.

Secondly, those teachers who choose to retire before the stipulated retirement age, currently fixed at 60, cannot access their pensions when they most need it.

Under the new system, the employer and the employee contribute defined
amounts (called a match) to a pension scheme which is invested in the market and generates interests at prevailing market rates. A retiring employee has the right to withdraw his/her savings plus interest, irrespective of the number of years worked.

The two systems have their own benefits and shortcomings. They have varying levels of stability, flexibility and earnings at retirement.

However, for purposes of stability in service, and in full conformity to the Public Service Superannuation Scheme Act, 2012, the union will propose that employees who have served for long under the current system be guaranteed their anticipated pension at current salary scales.

In the same vein, those who have worked for less than that period would be facilitated to transition from the DBC to the DCS based on their anticipated current pension estimates.

Bearing in mind that public servants are currently entitled to their pensions after 10 years of service, the union will engage the entire government machinery to ensure that due consideration is given to transitional mechanisms since existing regulations on retirement would cease to apply.”

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ABOUT THE NEW PENSION SCHEME 

In the new scheme, all employees are to forfeit 7.5% of their basic salaries towards the statutory pension scheme. This is the first time that the employees will be contributing for their retirement since the government has always shouldered the whole responsibility.

The Kenyan government has been trying to introduce the pension scheme for the past 13 years with little success.

The new scheme will now be mandatory for those joining service and those below 45 years.

Benefits of the proposed contributory Pension scheme

  • An employee can transfer pension benefit credits from a former employer to another with a similar Pension scheme.
  • The scheme allows employees to access part of their benefits even before the mandatory retirement age.
  • Teachers joining the scheme from non-contributory pension scheme will have their past benefits transferred to the new scheme.
  • Widows and Children’s Pension Scheme (WCPS) and NSSF contribution will cease immediately an employee joins the scheme.
  • Those who remain in the free Pension Act will be bound by the provision of the Pensions Act cap 189.
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