Consider reviewing 7.5 percent in Contributory Pension Scheme : The Standard

NAIROBI, KENYA: Trade unions, including KUPPET, KNUT, COTU have been up in arms against the about-to-be implemented 7.5 percent reduction from the teachers and civil servants pay for Contributory Pension Scheme (CPS). Though they are right on its immediate effect on civil servants, teachers and other workers, I strongly feel that pension reform in Kenya is long overdue. The long term benefits of CPS much outweighs the short term effects and immediate financial instability on contributors. The CBS is good but the 7.5 percent needs a review. It is much. Pension reform happens always in any part of the world. At one time, International Labour Organisations (ILO) 1951 was of the idea that a worker had freedom on how to use his money.

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ILO tolerated arguments that advanced that an individual worker should live life as he deems fit. He chose what to do with his money without being burdened with pension issues. Right now, ILO approves that upon our retirement, we need something to fall back to as retirees. Pension Management is one of the solid security attributes that International Labour Organisations Convention No. 102 recognised. Thus, the changes in pension scheme management cannot be wished away. Right now, retirees wait for months or years to collect their entitlement. Pensioners have failed to meet their statutory obligations of submitting pension entitlement within the statutory time-frames. Teachers had to fight court battles and wait for 18 years to have their pension processed.  This is due to pressure that the central government is currently facing. When workers contribute, a lot is saved and there is accumulation of capital that when well invested, can impact so positively on a retiree's welfare. Look at Chile, Chilean Pension reform of 1981 made it possible for retirement benefits to be paid promptly.

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In Chile, money is always available to settle any pension case that falls due. Nigeria adopted Chile's contributory system with a little modification and they have a success story. CPS accommodates the compassionate allowance. With the current arrangement, pension benefit is lost for an employee whose service is terminated for reasons such as misconduct, incompetence and inefficiency. Pension is not admissible under such conditions. But with the CPS, one is entitled to benefit because the money is his own savings. Even when one transfers his services from one organisation to another, nothing is lost. This enhances labour mobility. As one moves, he transfers his benefits. Again, one does not need to wait till he retires to get his entitlement. A worker can access part of his pension even when still working. This shelves losses that are in the current scheme. Engagements with the government on pension reform should aim at protecting the worker from too much saving at the expense of current living. CPS of most models is 15 percent of pensionable income. The employee gives 7.5 percent and the employer 7.5 percent. In Nigeria, the government gives 12.5 percent to the disciplined forces pension and leaves them with only 2.5 percent.

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As had been proposed earlier, the government ought to start with 2.5 percent, then adjust to 5 percent after some years then to 7.5 percent as it increases the workers income. At least, that will check against the a third rule take home policy. Dherok Peter Ochieng Omolo is a teacher in Kenya

Related Topics

Contributory Pension SchemeKNUTKuppet