New Guidelines On January 2022 Pension Deductions
The Head of Public Service, Joseph Kinyua, has released details which will guide deductions of 5% of public officer’s basic salary towards the new pension scheme from 1st January 2022.
In the fresh orders, Kinyua says public officers should realign their salaries to comply with 3% deduction as well as the provisions of section 19 (3) of the Employment Act,2007 which requires an employee to take home not less than one third of their salary. This implies that public servants will have to obey the one third rule prior to pension deductions.
The scheme which started on 1st January 2021 saw all public officers losing 2% of the basic salary channeled towards the scheme but the amount will increase by 3% in January 2022.
Kinyua had directed implementation of the Public Service Superannuation Scheme to include all Civil Servants, Teachers and Disciplined Services.
Records on the current service pension scheme indicate there are 375,000 teachers, 12,000 police and prison staff, more than 270,000 pensioners and 75,000 dependants.
This means that public workers will contribute approximately Sh2.4 billion monthly or Sh28 billion to the fund once it’s in full operation.
Kinyua said the rate of contribution will be graduated at the rate of 2% in the first year (2021); 5% in the second year (2022); and 7.5% in the third year (2023).
However, Kinyua said employees have the option to make additional voluntary contributions above the mandatory 7.5% of their basic salary.
The Public Service Superannuation Scheme Act 2012 was enacted as part of Government reform
initiatives in the pensions sector.
The Act established the contributory Public Service Superannuation Scheme (PSSS) in line with the policy direction issued by Government through the National Treasury Circular No.18 of 2010.
The Circular directed the conversion of all Defined Benefits Schemes in the public sector to Defined Contributory Schemes.
The objective was to align public service pension schemes with best practice in the retirement benefits industry.
The Head of Public Service says membership of the Scheme shall comprise the following categories:
i) Employees serving on permanent and pensionable terms of service and aged below 45 years as at 1st January, 2021;
ii) New employees who join the Public Service on or after 1st January, 2021 on permanent and pensionable terms of service;
iii) Employees aged 45 years and above as at 1st January, 2021 who opt to join the new contributory Scheme; and
iv) Employees whose services were transferred to a county government through letter No DCCIAON /91/XIV/125) dated 17th May 2016 are currently covered under the Public Service Pension Scheme, and fall under the first or third category above.