Companies Suspend Pension Schemes As Covid-19 Continues To Bite

Retirees in Kenya are likely to face a tough time as most companies have applied for the suspension of contributions to retirement schemes due to covid-19 crisis.

This follows a notice from the Retirement Benefits Authority (RBA) and the pension regulator on April 23 that allowed cash-strapped companies to postpone contributions to the pension schemes during the pandemic.

According to RBA Chief Executive Officer Nzomo Mutuku, a good number of companies have already sent their applications indicating that things will not go well for the pension beneficiaries.

The companies that have sent applications for the suspension of Pension contributions are mostly in the hospitality, aviation, manufacturing and media sectors.

In the applications, some companies have sought suspension of the contributions for a period of up to nine months.RBA says the period varies and a company can apply for a period that suits it.

Earlier, there were concerns that companies would start using Covid-19 to stop payments to the pension schemes a claim that Mr Mutuku has dismissed saying most companies have genuine requests.

The RBA Chief said “these Companies really have no choice,” as some have been forced to close some outlets.

A new proposal published last week will also affect the retirees’ earnings as it seeks taxation of income for all persons aged 65 years and above. The retirees who were earlier exempted from the taxes.

Companies will also have to remit varied contributions for employees who have taken pay cuts or those stills earning full salaries in the new RBA guidelines. Those who have gone for unpaid leaves will be exempted for a while.

RBA said the suspensions will affect the pension industry whose penetration is already 20 percent low in the formal and informal sectors.

The pension industry currently has assets amounting to 1.2 trillion shillings which is a 15 percent of the Gross Domestic Product.