The Teachers Service Commission (TSC) together with Public Service Superannuation Scheme has started sensitization of teachers on the the Public Service Superannuation Scheme (PSSS) popularly known as Provident Fund.
The programme which targets members i.e teachers who turned age 45 years as at 2021 and those employed thereafter has started in many counties today.
The Public Service Superannuation Scheme (PSSS) was established under the Public Service Superannuation Scheme Act No. 8 of 2012 for providing retirement benefits to Civil Servants, Teachers and Disciplined Services Personnel.
The Scheme is managed by a Board of Trustees with support of a full time Secretariat and Service Providers.
The Scheme became operational on 1st January, 2021 following gazettement of the commencement date by the Cabinet Secretary National Treasury and Planning pursuant to Section 1 of the PSSS Act.
The Scheme has the responsibility that include among others, educating members on their benefits and requirements as provided by the Act.
Teachers and Civil servants are now required to contribute for their pension through the provident fund.
Members are deducted 7.5% of their basic salary known as Provident Fund which go towards the scheme.
This is a defined contribution pension arrangement where the employee and the employer contribute to fund the scheme to benefit the employees.
The Scheme is regulated by the Retirement Benefits Authority (RBA).
Before the Defined Contributory Scheme the government operated a Non-contributory scheme (Free pension) that was fully financed by the exchequer since independence.
Disadvantages of Non-contributory scheme (Free pension)
1. The scheme disadvantages employees who may wish to leave service before they attain the age of 50 years since they do not qualify for pension or any other benefit.
2. When a member gets employment opportunity in another organization with a pension scheme, benefits under the scheme are not transferable to another pension scheme.
3. A member of the Scheme may not make additional voluntary contributions to the Scheme.
4. The accrued pension cannot be accessed while in service until time of exit.
5. It is discriminatory to male officers on account of marriage gratuity and widowers pension.
Advantages of Defined Contributory Scheme
1. Tax benefits which includes pretax tax contribution that reduces an employees taxable income. The pension contribution is deducted from the basic salary before tax is calculated. Members enjoy tax benefit to a maximum of the lesser of ksh 20,000 or 30% of pensionable emoluments.
2. An officer who exits the service through resignation or dismissal does not lose on pension.
3. The accrued pension can be transferred to another pension scheme of one’s choice on exit.
4. Employees have an option to make additional voluntary contributions to the scheme above the mandatory 7.5% of the basic salary. Where an employee takes this option, the government will not increase its contribution.
5. Members of the scheme may access retirement benefits earlier than the prescribed retirement age by reason of dismissal, resignation, ill health, mortgage finance, advance to buy a residential house, immigration or death.
6. The retirement benefits (mortgage loans) (amendment) regulations, 2020 gives pension scheme members a right to access up to 40% subject to a maximum of ksh 7 million of accumulated contribution to purchase a residential house.
Membership to the Defined Contributory Scheme
1. Employees serving on permanent and pensionable terms of service and aged below 45 years as at 01/01/2021
2. New employees who join the public service on or after 01/01/2021
Employees aged 45 years and above as at 01/01/2021 had the option to join or not to join. Employees aged 45 years and above who opted not to join the scheme remained in the public service pension scheme (the previous non-contributory pension scheme).
Contributions to the new Defined Contributory Scheme
The rate of contribution of the basic salary is graduated as follows; 2% in the fist year from 1st January 2021, 5% in second year from 1st January 2022 and 7.5% in the third year from 1st January 2023.
The employer contributes 15% of employees basic salary. PSSS being a defined contributory plan, employees and employers contributed funds are invested to earn investment income.
The funds are managed by the board of trustees. Upon conception of this agreement, the male employees no longer contribute to the Widows and Children’s Pension Scheme (WCPS) and NSSF from the date of joining the scheme.