The Association of Retirement Benefits Schemes (ARBS) and the Retirement Benefit Authority (RBA) have warned that unremitted retirement contributions total KSh65 billion and are urging a law to have pension deductions for civil servants taken directly from the Treasury.
Jane Nzau, chair of ARBS, said the uptake of pension schemes is only 26 per cent and that about 74 per cent of the informal sector remains excluded.
She noted that assets under management reached KSh3.1 trillion by the end of June and that the sector has grown since the 2000 launch of pension schemes.
“Post-retirement medical cover is the biggest challenge with our retirees and the ongoing regulations for post-retirement medical funds will cure the gap,” she said.
John Kaya of RBA outlined a proposal for deductions to be made directly from the exchequer to the relevant schemes and other statutory bodies.
He said public institutions are the main offenders, having deducted contributions but not forwarded them to the schemes.
“We are in the process of reviewing our act to incorporate a partnership with the KRA who can use their respective powers as agency powers to be able to collect some of these unlimited contributions,” said Kaya.
“The total and remitted contributions for both the principal which are the actual contribution plus interest stands at KSh65 billion”, he added.
Kaya also reported that the sector now has 70 service providers, over 4 million active members and eight million members already retired.
Daniel Mainga, vice-chair of ARBS, said the new post-retirement medical fund regulations raise governance issues but noted that the government has introduced tax incentives of up to KSh15,000 per month for members saving in such funds.
“If you contribute to a pension scheme and also to a post-retirement medical fund, one has a total of 45,000 as a tax allowable benefit on a monthly basis, which is a good improvement” said Mainga.
