State firms face funds freeze over pension arrears
Treasury secretary Henry Rotich has warned ministries whose corporations are not remitting workers’ pension deductions that they risk not getting funding in the next financial year.
In a memo to all cabinet secretaries, Mr Rotich has directed all ministries to ensure that State corporations disclose status of staff pension contributions for the last three years in their 2019/2020 budget proposals.
The CS says that his ministry has noted with concern that some State corporations have also defied the 2010 circular that required them to convert their pension schemes from Defined Benefit to Defined Contribution pension schemes.
“It is also noted that some State Corporations have not been remitting staff pension contributions to the respective schemes. Consequently, these State Corporations have accumulated huge arrears of staff pension contributions contrary to existing laws and Government policies,” notes Mr Rotich.
The memo means that such State corporations also face accrued interest on the unremitted contributions and a five per cent penalty on the principal amount, according to the amended Section 53 of the Retirement Benefits (RBA) Act Cap 197.
Kenya Broadcasting Corporation (KBC) falls in this category, given that it was yet to remit Sh764 million to the employees’ pension scheme which had accumulated since 2011. This is contained in the statement prepared by its management to the Senate in August.
An audit report commissioned by the Education ministry showed that as at June 30 last year, 26 universities had failed to remit a total of Sh4.58 billion in pension. University of Nairobi had not paid Sh1.3 billion while Jomo Kenyatta University of Science and Technology was still sitting on Sh1.09 billion.
Last year, Local Authorities Pension Trust said the value of outstanding pension remittances and accrued interest from its key sponsors jumped to Sh18.6 billion in September from Sh14.42 billion in December 2016.
The major debtors were Nairobi and Mombasa counties as well as the Nairobi City Water & Sewerage Company.
Mr Rotich said the responsibility for ensuring compliance with his latest memo lies with the Board of Directors of affected State corporations, University Councils and CEOs of Institutions.
“The National Treasury and Planning will not approve or recommend to the line Ministries approval for the proposed budgets that are not submitted in line with this Circular,” he warns.