Payouts to retired public service workers lagged the target by Sh23.65 billion on a pro rata basis in the first quarter of the year ended September 2024, pointing to a deepening cash crisis in the public sector on the back of softening tax receipts.
The Pension Department at the National Treasury processed Sh32.14 billion in payments to retirees in the review period, a modest 4.23 percent growth from Sh30.83 billion a year ago.
The disbursements, which are a priority spending under Public Finance Management law, were, however, behind the pro rata target of Sh55.60 billion, going by the full-year goal of Sh223.15 billion for the period ending June.
The rising expenses for retirees, triggered by the mass retirements, have in recent years combined with debt costs to deny President William Ruto’s administration the funds it needs for development projects such as roads, affordable housing units, and power transmission lines.
In the last fiscal year ended June, the pensions department struggled to meet requests due to below-target revenue performance, with payments to senior citizens falling short by Sh40.14 billion to Sh148.95 billion.
Carry-overs from last year, together with President William Ruto’s order that public servants who reach the retirement age of 60 must exit the government, resulted in the pension budget rising by Sh23.78 billion in July from an initial Sh199.37 billion.
“Henceforth, public servants who attain the retirement age of 60 years shall be required to immediately proceed with retirement,” Dr Ruto ordered on July 5. “They are directed to do this with no extensions to their tenure of service.”
Dr Ruto’s directive has unsettled this decades-old practice, and the Treasury has moved to allocate cash to facilitate a smooth transition.
Before the President’s directive, some 85,400 public service workers were expected to retire in three financial years ending June 2026, according to the Pensions Department at the National Treasury.
This includes 30,155 workers in the just-ended financial year, 28,745 in the current fiscal year ending June 2025, and 26,500 in the subsequent year.
The number has now increased as workers, largely those with special technical skills and expertise whose employment had been extended, are now expected to leave public service.
The rising pension bill expenses, triggered by the mass retirements, have brought to the fore a possible job crisis in the aging civil service, amid a suspension of new recruitment pending completion of a planned audit and cleansing of public payrolls and pension bills to “eliminate ghost workers”.
The pension bill pressure has continued to pile on taxpayers following a knee-jerk decision in 2009 to raise the retirement age from 55 to 60, partly due to the Treasury’s past failure to push through necessary reforms, including the launch of a contributory retirement scheme.
