Provident Fund-objectives, coverage, membership, features and benefits
The object and purpose of the Public Service Superannuation Scheme shall be to:
- Pay retirement benefits to members of the Scheme;
- Ensure timely payment of benefits to members as and when they become due.
- Improve the social security of members; and
- Establish a uniform set of rules, regulations and standards for the administration and payment of retirement benefits for members of the Scheme.
The Scheme covers the following:
- Civil Servants;
- Teachers employed by the Teachers Service Commission;
- Disciplined Services (National Police Service, Prisons Service and National Youth Service).
Membership to the new contributory scheme comprises the following categories:
- Employees serving on permanent and pensionable terms of service and aged below 45 years as at 1st January, 2021;
- New employees who join the service on or after 1st January, 2021 on permanent and pensionable terms of service
- Employees aged 45 years and above as at 1st January, 2021 who opt to join the new contributory Scheme;
- Employees whose services were transferred to the County Government and are currently covered under the Public Service Pension Scheme will be processed as per the above provisions.
Features of PSSS
The PSSS is a Defined Contribution Scheme where the Government and employees will contribute to the Scheme to fund the retirement benefits of the employee.
The contributions will be paid into the Fund established and managed under the Act and regulated in accordance with the Retirement Benefits Act.
Rates of Contribution
- Employees will contribute at the rate of 5 % of their monthly basic salary graduated at the following rates: 2% in first year; 5% in the second year; and 7.5% in the third year.
- The Government will contribute 15% of the monthly basic salary in respect of each employee.
- Employees will have an option to make additional voluntary contributions to the scheme above the mandatory 5% of the basic salary. Where an employee takes this option, the Government will not increase its contribution.
The benefits under the new contributory Scheme are portable and therefore an employee can transfer accrued pension benefits from one registered scheme to another irrespective of the sector (private or public).
Access to Benefits before Retirement
Members of the scheme may access retirement benefits earlier than a prescribed Retirement Age by reason of dismisal, resignation, ill health, mortgage finance, advancement for the purchase of a residential house, immigration, death or any other circumstance as may be prescribed in the Act.
Regulation of the Scheme
The new contributory Scheme shall be regulated by the RBA.
The Contribution is deducted from the salary before tax is calculated.
Members can enjoy tax benefit to a maximum of the lesser of Kshs.20,000 or 30% of pensionable emoluments.
Life Insurance and Disability Cover
The Act provides for a Life Insurance Policy that has disability benefits in favour of every member of the scheme, for a minimum of five times of the members annual pensionable emoluments.
Terms of Commutation
Under the Scheme a member can withdraw up to a maximum of a third of the accumulated savings upon retirement. A member can also withdraw all the additional voluntary contributions with accrued interest.
The Scheme ensures involvement of the employees and pensioners in the management of their retirement fund through participation in the Board of Trustees in accordance with the Act.
Access to contributions to purchase a Residential House
The Retirement Benefits (Mortgage Loans) (Amendment) Regulations 2020 provides for a member to access up to 40% subject to a maximum of Kshs.7million of accumulated contributions to purchase a residential house.
Benefits provided by the scheme
The following benefits are payable at retirement as per the provisions of this Act;
- A member may take a lump sum not exceeding one third of the balance in retirement savings account. However, additional Voluntary Contributions made into the Scheme and the accrued interest can be withdrawn in full.
- A monthly or quarterly annuity for life purchased from a life insurance company of a member’s choice;
- A monthly or quarterly withdrawals calculated by an actuary on the basis of life span and paid from the Fund.
In the event that a member dies whilst in Service before Retirement, the following benefits will be payable to the beneficiaries:
- A member’s scheme credit;
- The insured benefit of up to five times the annual pensionable. NEXT