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Treasury in race to clear Sh77.45 billion backlog for retirees


Treasury in race to clear Sh77.45 billion backlog for retirees

Monday June 26 2023

Treasury Cabinet Secretary, Prof Njuguna Ndung'u. PHOTO | DIANA NGILA | NMG

The Treasury has started clearing a backlog of payments for retired public servants, signalling an easing cash crunch that had earlier this financial year hit the payroll for fresh retirees.

Analysis of data on expenditures from the State’s main account, the exchequer, reveals Sh31.16 billion in claims were processed and paid by the Pensions Department in May. The payouts for the month were higher than an average of Sh5.65 billion in the preceding five months from last December or a cumulative Sh28.27 billion in that period.

A total of Sh95.19 billion has been paid to retirees in a lump sum (gratuity), ordinary pension (remitted monthly) and contribution to the public service retirement scheme in 11 months through May.

That is, however, Sh31.86 billion, or 25.07 percent, lower than a similar period last year when Sh127.05 billion was paid out to senior citizens.

Read: State pay to retirees falls by Sh36bn amid cash crunch

The reduced pay has left the Treasury racing to process and pay a whopping Sh77.45 billion this month if it were to hit the Sh172.64 billion target for the current fiscal year — comprising Sh73.85 billion in lump sum payment, Sh66.55 billion ordinary pension and Sh31.90 billion towards Public Service Superannuation Scheme.

The slowed payment of retirees’ dues came at a time the Treasury scaled down the ongoing upgrade of the Pensions Management Information system which is aimed at automating and integrating all pension payroll systems.

The Treasury now says in the second supplementary budget document, awaiting approval by lawmakers in the coming days, it now targets to complete 60 percent of works this fiscal year, reduced from the initial projection of 70 percent.

Processing and payment of retirement claims have trailed last financial year’s with Treasury Cabinet secretary Njuguna Ndung’u, citing pension liabilities, alongside debt repayment costs, as major fiscal risks giving President William Ruto’s administration an unrelenting headache.

“With the increasing number of retired officers, dependents and the increased life expectancy rate, the pension wage bill has been rising exponentially posing a fiscal risk,” Prof Ndung’u wrote in the 2023 Budget Policy Statement, a document that provides expenditure ceilings for the government.

The pensions department usually targets to process an average of 600 files per week, with payment expected after 21 days.

New retirees are required to physically bring validation documents for verification and approval to Nairobi.

“To effectively administer the public service pensions, the National Treasury will invest in modern technology and digital solutions to streamline pension processes and improve service delivery,” wrote Prof Ndung’u in Budget Statement on June 15.

“In this regard, Public Service Schemes will develop user-friendly online platforms that allow pensioners to access their pension statements, make inquiries, and update their personal information conveniently.”

The retirees’ payroll has been soaring in recent years on the back of a fast-ageing public service, piling pressure on taxpayers who bear the brunt of the payments, which are a priority alongside debt repayments and salaries for constitutional offices.

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