25/2/2022
Let’s talk about Pension… By Verah Mugambi
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very time one is called for a job opportunity, their biggest hope is to be appointed under permanent and pensionable terms. The permanent part is obvious, work until the official retirement age. But how much do we know about the pension part? Having a retirement plan is important. Pension is vital as it helps maintain and sustain the standard of living after retirement. Pension enables one to cater for their basic needs and also provides a safety net as one no longer enjoys their monthly salary or allowance benefits given in employment. To help us understand the pension schemes, we talked to Ms. Stella Githaiga, a senior nurse working in the Universal Health Coverage unit, which is within Affiliation and Institutional Development (AID) at KNH, and Mr. Peter Mureithi, an internal auditor who has worked in the hospital for over 22 years. They are both elected trustees in the Defined Contribution (DC) pension scheme. What are the different pension plans? Stella Githaiga: There are two main types of pension schemes: the Defined Benefit (DB) and the Defined Contribution (DC) plan. A Defined Benefit plan guarantees a set monthly payment for life (or a lump sum payment on retiring) rather than depending directly on individual investment returns. A Defined Contribution plan creates an investment account that grows throughout the employee’s working years. “Pension’s main mandate is for members to be able to save towards their old age. In KNH, one is eligible to start saving for pension as soon as they are appointed to permanent employment.” “At KNH we have both pension schemes; Defined Benefit (DB) and the Defined Contribution (DC) plan. The employee contributes at least 5% of their basic salary towards
PHOTO | FREEPIK A representation of growth in pension as a young man till old age when one retirees
their pension and the employer doubles their contribution.” Ms. Stella continued. She states that each pension scheme has trustees; the DC scheme has eight (8) trustees; four (4) nominated by the employer or sponsor and they include the CEO, HR, Corporate Secretary and one board member. The other four (4) positions are competitive-elected by members. DB has nine (9) trustees; six (6) nominated by the sponsor and three (3) elected by members. “The DC scheme was started in July 2011 after a directive from the National Treasury. Pension is a benefit to the employees and the hospital is not obligated to contribute, but KNH our sponsor has done really well in
ISSUE 3| Kenyatta National Hospital Newsline
Pension’s main mandate is for members to be able to save towards their old age. In KNH, one is eligible to start saving for pension as soon as they are appointed to permanent employment.” Stella Githaiga
terms of having a pension scheme. After being elected, one undertakes a five-day mandatory training to qualify as a registered trustee. The course is examinable and it enlightens one on the position’s expectations,” Mr. Peter Mureithi, told Newsline. DB is an old scheme that no longer accepts new members since 2011. The DB scheme calculates pension based on the employee’s last pay and some actuarial factors including; the economy, the market rate etc. This was complicated and that is why the government made changes in order for members to be involved in contributing towards their schemes. When the DC scheme was initiated in 2011, members who were 45 years old and above, remained automatically in the DB scheme until retirement and even past retirement. “Members who were 45 years and
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