By Staff Reporter
Teachers aged 45 years and below will see their monthly salary shrink by about 7.5 per cent effective 1st January 2021.
Teachers are among over 500,000 civil servants expected to contribute to the newly established Public Service Superannuation Scheme (PSSS).
Once effected, the Teacher Service Commission employed highest-paid teacher will contribute Sh11,824 to the fund, while the lowest-paid teacher will part with Sh1,631 per month.
Treasury CS Ukur Yattani said teachers under the Commission aged 45 years and above will be given an option to join the new Scheme or remain in the old Scheme.
Early August, Yattani appointed and gazetted the commencement date of the Scheme, which had remained in a limbo for years.
In the current pension scheme, teachers, like other civil servants do not contribute towards their pension and their benefits are paid from tax.
In the new arrangement, however, the Government will match every teacher’s monthly contribution at the rate of 15 per cent of the pensionable salary.
“Under the contributory arrangement, the investment income realised will allow for retirement benefits improvement that will guarantee adequate monthly income and financial security in old age,” he said.
Conversely, monthly contributions by employees of up to 30 per cent of their basic salary or Sh20,000 whichever or is lower, will be tax-deductible.
The contribution is deducted from the salary before tax is calculated and in effect reduces the tax level and improves the pay of an employee as well as avoiding double taxation of pension contributions and pension payouts.
“Upon commencement of the contributory scheme, the current Public Service Pension arrangement will be closed to all new employees and all serving employees, who will be aged below 45 years as at 1st January, 2021,” the CS stated.
The Cabinet passed the proposal for the contributory Scheme in 2003, and despite numerous challenges, Yattani gazetted the 1st January 2021 as the commencement date of the Act.
The Public Service Superannuation Scheme Act, 2012, was assented to on 9th May 2012 as part of the efforts to reform the public pension sector.
The Act established the contributory to provide retirement benefits to public servants as the Scheme covers all employees of the Public Service, including teachers.
The Institutional Framework of the Scheme comprises of the Public Service Superannuation Fund and the Board of Trustees.
John Matiang’i and Wicks Mwethi were appointed by Treasury CS as members of the Public Service Superannuation Fund Board of Trustees.
Matiang’i and Mwethi are national treasurers of Kenya National Union of Teachers (KNUT) and Kenya Union of Post Primary Teachers Education (KUPPET) respectively.
The Board, which draws membership from both the employer and the workers’ unions, is charged with the responsibility of operating and managing the fund.
“All contributions shall be paid into the Fund and conversely, all the benefits and any other payments required under the provisions of the Act shall be paid out of the Fund,” he said.
This Scheme, he noted, is portable and allows employees to transfer their services to other employers without losing their pension benefits.
Yattani further stated that teachers who for any reason exit Government service before the retirement date, will be allowed to access their own accumulated contributions and a further 50 per cent of the Government portion on leaving service.
The new Scheme ensures involvement of the employees and members in the management of their retirement fund through participation in the Board of Trustees in accordance with the Retirement Benefits Authority.
“This in essence enhances a sense of ownership and oversight of the management of the fund,” he said.
Other civil servants covered in this Scheme include those under Public Service Commission, National Police Service (NPS).
The fund is expected to generate a monthly income of over Sh3 billion and is projected to form a formidable resource to not only stimulate the economy but also support the big four agenda.
