Starting July this year, civil servants will be deducted 7.5 per cent of their salaries for their pension contribution.
The government will then match the contributions with an amount equivalent to 15 per cent of every worker’s monthly pay.
Treasury Secretary Henry Rotich has signalled through draft Budget Policy Statement that the delayed civil service pension scheme will start in the coming fiscal year after allocating Sh24 billion to kick start the fund.
Public servants do not contribute to their retirement upkeep, a move that will increase taxpayers’ pension burden to Sh109 billion in the year starting July from Sh15 billion in 2002.
Part of the pension time-bomb has been attributed to the government’s failure to push through necessary reforms, including kick-starting the long-awaited contributory pension scheme.
Civil servants were initially to contribute two per cent of their monthly salary to the scheme in the first year, five per cent in the second and 7.5 per cent from the third year.
The contributory scheme has been dogged by numerous challenges that have seen its roll-out suspended more than five times since its inception in 2009.
The contributory scheme will see the government adopt the private sector pension model where contributions from employers and employees are invested in equities, property and government paper to generate returns.
The responsibility of the government will be a monthly contribution as opposed to the current structure where it pays for retired civil servants’ pension.