National Assembly committee rejects MPs' push for one-term pension perks

A proposal to award Members of Parliament (MPs) hefty retirement benefits, even for serving a single term, has been rejected by the National Assembly’s Finance Committee.

The rejected Parliamentary Pensions (Amendment) Bill, 2023, sought to offer MPs pension perks even if they served for less than a year or were under 45 years of age.

The Bill proposed that lawmakers receive a gratuity for their time in office, regardless of how long they served.

“A person shall be entitled to receive gratuity where the person ceases to be an MP and has served an aggregate period of five years or less,” the Bill reads.

Currently, MPs only qualify for a pension after serving two terms and reaching the age of 45. The proposed law aimed to change this by granting MPs a gratuity upon leaving office after just one term.

It also introduced a provision for MPs who retire due to ill health to receive pensions.

The Finance Committee, chaired by Molo MP Kimani Kuria, dismissed the proposal, arguing that introducing a gratuity scheme for MPs would be too expensive for the government.

“It means those who elect to be paid a gratuity at the end of their term will not contribute to the pension scheme,” the committee noted in its report to Parliament.

The report added that the government would bear the full financial burden of MPs' terminal benefits if this were to pass.

The committee further argued that the proposal contradicts best practices for pension schemes, which typically require members to contribute to their retirement benefits.

“The best practice for retirement benefits is that an occupational scheme should have a structured design where members contribute. This reduces the burden on the exchequer and taxpayers,” the report says.

The committee also expressed concerns that offering both pension and gratuity options under the same scheme, with different eligibility criteria, would be inconsistent with international standards.

“Introducing the option of gratuity and pension at the same time, with different eligibility requirements, is not in line with widely accepted best practices,” Kuria’s committee noted.

The committee ultimately recommended that the proposed changes to the pension system be deleted, stating they would be “unjust” and place contributing members at a disadvantage.

“Having both pension and gratuity in one scheme is not aligned to international best practice and would cause difficulties in implementation,” the report says.

If the proposal is rejected by Parliament, MPs who serve a single term and opt for gratuity would receive an exit package of Sh11 million, including a gratuity payment and a refund of their contributions.

Under the current scheme, MPs earn a salary of about Sh710,000, which translates to a gratuity payment of approximately Sh8.3 million. Their contributions would amount to around Sh3.2 million.

Despite the committee’s objections, MPs still retain the power to determine their pension, gratuity, and other benefits. The Bill allows the Parliamentary Service Commission (PSC) to set the budget for paying pensions, gratuity, refunds of contributions, and other allowances for MPs.

Cost concerns from Treasury

During the committee hearings, the Treasury raised concerns about the financial implications of the proposed gratuity scheme.

It argued that the new provisions would be costlier to the government compared to the benefits currently provided under the Parliamentary Pensions Act.

“The new provision would be more expensive to the government since MPs would receive lifetime pensions after a shorter contribution period of five years,” the Treasury said.

According to the PSC, MPs who have served two terms could take home a lump sum of Sh7.5 million and receive an annual pension of Sh1.5 million.

Lawmakers who have served a single term currently receive Sh7.3 million in exit benefits, slightly higher than what is provided under the Parliamentary Pensions Act.

The PSC pensions committee had proposed that MPs be paid gratuity at 31 per cent of their basic annual pay for each year served, along with a refund of their contributions.

Additionally, the proposed law sought to provide one full year’s salary to the legal representatives of MPs who die within their first 12 months in office.