LETTERS: New Retirement Benefits Act to boost pension schemes



LETTERS: New Retirement Benefits Act to boost pension schemes

Currently the requirement for corporate is only
Currently the requirement for corporate is only a requirement for individual pension schemes. FILE PHOTO | NMG 

Section 73 of the Finance Act, 2018 which became effective (retrogressively) on July 1, 2018 amends the Retirement Benefits Act, 1997, by inserting Section 53B after Section 53A.

An important aspect of this amendment is that it provides that notwithstanding the provisions of Section 53A of the Retirement Benefits Act, and in cases where there is non-remittance of the pension contribution by the employer, the Retirement Benefits Authority shall, among others, issue a notice requiring the employer to pay the contributions and interest accrued to the scheme in full.

There will be a penalty of five percent of the unremitted contributions or Sh20,000 whichever is higher to the RBA; or immediately cease further deductions from employees’ emoluments and notify all the members of the scheme of the cessation.

Where there is a failure by an employer to comply with a direction to cease such deductions, the authority shall take the necessary action as it may deem necessary in protecting the interests of the members, including instituting summary proceedings to recover the amounts due to the scheme

The RBA, when such remittance is not made, shall also initiate the process of winding up the scheme and facilitate members to join individual schemes where their contributions shall be remitted.

Whereas the Finance Act, 2018, may have come to the chagrin of the employees and employers as well, it definitely is a cloud with a with silver lining as a source of potential reprieve to the pensioners as it seeks to ensure that the employers comply with timely deduction and transmission of the pension deductions.

By providing for penalties, empowering the authority (unlike in the case of Section 53A where it is the scheme itself) to institute summary proceedings to recover delayed unremitted sums and members to join individual schemes, the amendments to the Act no doubt serve to discourage and deter delayed transmission of pension deductions.

To however further enhance governance in pension schemes administration, the regulator and other stakeholders still have an assignment to see into it that as is legally and practically possible the aspect of corporate trustees otherwise called trust corporations is introduced and anchored in the Retirement Benefits Act and regulations.

A possible solution is to make it mandatory for all pension schemes to have corporate trustees included in the governance of pension schemes. A subtle way is to having them not as the sole trustees but to work alongside the individual trustees. The advantage of this is that corporate trustees will bring the often missing and elusive independence into the schemes while also infusing the pension schemes with the requisite skills, experience and enthusiasm specific to the pensions sector. Currently the requirement for corporate is only a requirement for individual pension schemes.

Ibrahim Kitoo, Advocate of the High Court of Kenya, Certified Pension Schemes Trustee.


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