Teachers and Police Officers To Take 7.5% Pay cuts in new Government Scheme

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More than 530,000 civil servants, including police and teachers, will in January have their take-home pay cut by 7.5 percent as they start contributing to their pension savings scheme. A Business Daily Report has revealed.

The new directive that is set to take effect beginning January 2021 will see employees attached to ministries and state agencies loose a slice of their salaries to soon to be created Public Service Superannuation Scheme (PSSS).

The Treasury SC is said to be planning a launch of the new scheme on Wednesday, August 5th and the scheme is set to be the biggest pension scheme in the country.

Mr Yatani said the move is aimed at reducing the pension burden currently borne in whole by the exchequer, especially in the Covid-19 era that has seen revenue sources depleted.

So, what is the implication of these? Once the scheme takes effect as from January 2021, State workers will contribute about Sh2.4 billion monthly equivalent to  Sh.28 billion yearly to the fund that will emerge as Kenya’s largest pension scheme.

Usually, civil servants unlike workers in the private sector, do not contribute to their pension, with their benefits paid straight from taxes. But now all this is set to change.

The statement from the scheme reveals that membership to the scheme will be mandatory to all new entrants upon commencement of the Act and all employees aged below 45 as at the date.

It further states that employees aged 45 years and above will have an option to join the scheme by completing the Public Service Superannuation Scheme option form.

Effective July teachers received a pay rise following the implementation of bargain agreement. Back in July 2017, government workers received a pay rise of between 17% and 30%.

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The free benefits will increase the taxpayers’ pension burden to Sh121 billion in the year starting July from Sh15 billion in 2002.

Civil servants were initially to contribute two per cent of their monthly salary to the scheme in the first year, five per cent in the second and 7.5 per cent from the third year.

But the staggering has now been stopped, with workers expected to contribute the 7.5 per cent of their pay in the first year, starting January.

The Treasury is spending more to keep retired civil servants comfortable in retirement compared to health (Sh111 billion), water (Sh83.3 billion) and energy (Sh72 billion.)

“Benefits accrued prior to joining the new scheme shall be recognised in the form of an amount acknowledged through the issuance of a letter recognising accrued benefits at the date of joining the scheme under this Act,” said the Treasury brief.

The Public Service Superannuation Scheme (PSSS) Act was assented to on May 9, 2012, with objectives including payment of retirement benefits to members of the Scheme and ensuring that members receive their payment when they are supposed to.

The Public Service Superannuation Fund will have a board of directors with the chairman appointed by the cabinet secretary.

Also Read:All universities and Colleges to remain closed until January

 

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