This archive report was first published on 19 June 2020.
Parliament Must Reject Tax on Pension ¶
June 19, 2020
By Jaidi Kisero
The Treasury's proposal to tax pension income is a brazen display of arrogance and bureaucratic hubris. The amendments, which were initially introduced in April, sought to remove tax exemption status on investment income of retirement schemes, the National Social Security Fund (NSSF), and pension benefits for citizens above 65 years.
However, the National Assembly's Finance Committee shot down the proposals after receiving cogent arguments and representations by stakeholders in the retirement benefits industry. But the unelected mandarins at the Treasury had other plans, reintroducing the amendments in the Finance Bill 2020.
The proposals are discriminatory to the NSSF, which is the most important retirement scheme with the largest number of members in the country. The NSSF is owned by contributors who expect a return on their investment in the fund when they retire. The taxman's decision to breach expectations of members in such a brazen manner is baffling.
Most pension schemes are unable to guarantee a retiree even one tenth of the income that they used to earn when they were in employment. The worst affected by the misery of low pension benefits are public service retirees, former civil servants, and teachers.
The National Social Security Fund, a mandatory scheme, performs poorly in terms of providing adequate old-age income. The lump sums it pays to retiring workers can hardly replace pre-retirement income. The high cost of administration of the fund and low ceilings on monthly contributions are major contributing factors.
Parliament must move quickly to jettison the amendments and protect the interests of pensioners and retirees in this country. Workers who retire in Kenya are condemned to abject poverty because the pensions paid to the majority are woefully small to provide for their livelihoods.
