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1. Page 1 KENYAN PUBLIC SERVICE PENSION REFORMS PRESENTATION at UNECA CONSULTATIVE MEETING 26 MARCH 2009 Anne K. Mugo – Pensions Secretary, GoK

2. Page 2 TOPICS FOR PRESENTATION STRUCTURE OF KENYA RB SECTOR CSPS SCHEMES EXPENDITURE TRENDS & BUDGETS BRIEF HISTORY CURRENT STRUCTURE OF SCHEMES CSPS REFORMS: PSSS FEATURES IMPLEMENTATION LESSONS LEARNT AFRICA COMPARISON

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6. Page 6 CSPS PENSIONS EXP – 10 YRS –KShs. bn

7. Page 7 CSPS - CURRENT BUDGET BENEFITS PAID: Budgeted 2008/09 KShs.26.2bn ($0.33bn) -about: 1.4% of 2007 GDP - Compare UK 5-6% and Italy 15% of GDP. 4.6% of the Government’s Rec. Expenditure – 2008/09 Ranked 6th in total Exp after Educ, Def & Int Sec ADMIN EXPENSES = Budgeted 2008/09 KShs.294m ($3.6m) i.e. 1% of Benefits paid.

8. Page 8 CSPS - PROJECTED BUDGET Projected to rise to KShs30bn ($0.4bn) by 2009/10 Actuary estimates future average growth rate of 15% p.a. To peak at about KShs.150bn ($2bn) in 2034 even if closed to new entrants!!

9. Page 9 CSPS SCHEMES – BRIEF HISTORY 1921– European Widows & Orphans 1927 – Europeans Officers 1932 – Non-Europeans: Mostly Asians 1946 – Pensions Act Cap. 189 & Regulations 1980 – Armed Forces Pensions 1984 – Parliament Scheme 2003 – President Scheme

10. Page 10 CSPS REFORM - PSSF Civil Service (CS) Teachers (TSC) Disciplined Forces (DF) NB: The three schemes are due for Phase I reform and are: Non contributory; & Non Funded Pensions fraction 1/480; & Retm Age: 55 years

11. Page 11 OTHER CSPS SCHEMES - I Judiciary (JD) - 1/480th ; Non-Contributory; – Retm 55 yr (Judges 74 yr); Armed Forces (AF) - 1/400th; - Non-Contributory; - Retm 12, 16, 20 or 55 yrs Parliament -1/300th contributory @ 12.6%/Govt 25.2% - Retm 4 President - 80%; - non-contributory; - Retm on leaving Ex-East African Community Pension non contb; - Provident contb; - Retm 55 years Parastatals (prev. in Central Govt.) – various types; - contributory; -Retm 55 years

12. Page 12 CSPS REFORM: PSSS – FEATURES DC with individual accounts Contributory Employees - 7.5% of basic salary : Phased in 2%;5%;7.5% Government - 15% of basic salary RBA Admin Structure – emphasis on segregation Board of Trustees Custodian Manager Administrator

13. Page 13 Age 60 effective date: 5th March 2009 Sensitisation Program: 6th – 30th April 2009 Scheme Commencement Date: 1st July 2009 Entry Dates: Open by 30th June 2009 Option Form to be completed by those above 45 years before 30th June 2009 New Entrants on appointment w.e.f. 1st July 2009 PSSS – IMPLEMENTATION

14. Page 14 PSSS – LESSONS LEARNT BEWARE THE POLITICS – Timing ‘Political Window’ COMMUNICATE – Involve Stakeholders early WHAT IS IN IT FOR ME? – Policy Makers’ Dilemma THE LETTER OF THE LAW – Constitution; Legal framewk BACK TO SQUARE ONE – Revisit Options KEEP IT SIMPLE – No Perfect Model; What suits your scheme/country - What can start now; what later PROPER GOVERNANCE STRUCTURE

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16. Page 16 KENYAN PUBLIC SERVICE PENSION REFORMS THANK YOU

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