Special inflation-adjusted pension pay deal for judges

The proposal, however, flies in the face of a move by MPs and the Treasury to reject an inflation-based pension increase for public servants on grounds it is unsustainable. Expenditure on pensions and gratuities stands at upwards of Sh200 billion per annum based on current figures from the Treasury.

The Treasury is grappling with a mounting pension crisis, which has triggered defaults in making the monthly disbursements to thousands of retired public servants.

“Subject to provisions of this Act, pension increases shall be paid on July 1 of every year on every specified pension…The pension increase shall be equivalent to the increase in the Consumer Price Index as reported by the Kenya National Bureau of Statistics for that financial year,” the Bill reads in part.

MPs and the Treasury rejected a similar plan to introduce a cost-of-living-adjustment for pensions of all retired public servants last April, saying it would be unsustainable.

The National Assembly Committee on Finance and National Planning shot down the Pensions (Amendment) Bill 2024, which sought to introduce inflation-based pension increment for retired public servants.

“Further, it (committee) noted that implementing the proposals in the Bill would substantially strain the Exchequer within Kenya’s tight fiscal space. Finally, the committee also observed that the Bill is discriminatory and is in breach of Article 27 of the Constitution since it provides for different treatment of two tiers of retirees,” the committee said in April.

“Introduction of cost-of-living adjustment and salary-based pension computation would have significant fiscal implications, particularly given the rising number of pensioners and increasing life expectancy,” the Treasury told lawmakers.

The Salaries and Remuneration Commission (SRC) had backed the proposal. It remains to be seen whether SRC will also endorse the plan to have pensions for retired judges adjusted for inflation.

Changing the law to have the pension of ex-judges reviewed to cater to inflation raises questions on the motivation given that the Exchequer is still struggling to make timely payments of pension benefits.

For example, the Treasury defaulted on disbursing Sh23 billion of pension cash to retired public servants in the 2023-24 financial year. There are concerns that the woes will persist in the foreseeable future.

In the financial year that ended yesterday, the budget for pension and gratuities was Sh223.14 billion with the allocation significantly rising over the years. For example, the budget for pension and gratuities was Sh86.98 billion in the year to June 2020.

Increasing pensions to mirror the increased cost of living will significantly boost the spending power of retired judges, giving them an edge over other State officers and public servants.

Inflation stood at 3.8 percent in May this year, compared to five percent a year ago, according to official data from the Kenya National Bureau of Statistics. The cost of living has, in previous crises, hit highs of 19.72 percent and 11.7 percent in November 2011 and May 2017 respectively, eroding the purchasing power of workers and retirees.

Currently, pension reviews are undertaken every two years in line with the Pensions Increase Act (Cap. 190). The Act provides for a three percent increment for all pensions, along with any previously granted increases.

However, the provision of the Pensions Increase Act (Cap. 190) will no longer apply to the pension of judges if the Bill is passed into law.
The Judges’ Retirement Benefits Bill 2025, sponsored by Majority Leader Kimani Ichung’wah, was tabled in Parliament on June 19 as the State seeks to give preferential treatment to retired judges despite denying public servants similar benefits.

Members of the public are also expected to submit their views on the Bill, with eyes on whether Parliament will include them in the report that will inform debate and voting on the proposed law.

The Bill further proposed that judges exiting service due to mental or physical incapacitation shall be entitled to at least 50 percent of what they would have received had they served for at least 10 years and left upon reaching the retirement age of 65 years.

Judge’s pension will be paid from the Judges’ Retirement Benefits Fund where the judicial officers will contribute 7.5 percent of their pay while in active service.

The government, as the employer, will contribute to the fund 15 percent of each judge’s pensionable pay. The contribution will be directly charged to the Consolidated Fund.

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