A heated debate has erupted between the National Treasury and the Salaries and Remuneration Commission (SRC) over proposed amendments to the Pensions Act, Cap 190, that seek to introduce automatic cost-of-living adjustments for retired public servants.
The Pensions (Amendment) Bill, 2024, sponsored by Matuga MP Kassim Tandaza, proposes that pension calculations be based on the most current salary applicable to a given job group. Proponents argue that this will ensure fairer retirement benefits, but Treasury officials warn of significant financial strain on the Exchequer.
During a session before the National Assembly’s Departmental Committee on Finance and National Planning, Treasury officials strongly opposed the bill.
Michael Kagika, Director of Pensions, speaking on behalf of Treasury Principal Secretary Chris Kiptoo, cautioned that implementing the changes could disrupt budgetary planning and divert funds from critical public services.
“With automatic cost-of-living adjustments, pension liabilities could balloon, especially during periods of high inflation, placing immense pressure on government finances,” Kagika stated.
He further emphasized the need for an actuarial valuation to assess the long-term sustainability of the proposed changes, revealing that the Pensions Department is currently conducting such a study, with results expected by mid-April.
In contrast, the SRC has endorsed the bill, citing inequities in the current pension system. The commission argues that aligning pension payments with present salary levels would address discrepancies and ensure that retirees receive fair compensation.
“This amendment would bridge the gap in pension earnings and provide retirees with benefits that reflect current economic realities,” an SRC representative noted.
The debate highlights the broader challenge of balancing economic sustainability with social welfare, as Kenya grapples with an aging population and increasing life expectancy.
