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Kenya’s CPF to focus on reducing Ksh14.4 billion owed to Laptrust DB Scheme

County Governments in Kenya owe the local authorities pensions trust (LAPTRUST) Ksh.14.4 billion in outstanding debt.

CPF financial services group managing director, Hosea Kili, said the rise of the Scheme debt from Ksh 6.2 billion in 2014, to Ksh14.4 billion as at December 2016, was as a result of slow  remittance of contributions by the defunct local authorities and the initial delay by the county governments to handle such inherited liabilities from the local authorities.

Speaking in Nairobi on Friday during the Annual General Meeting of the scheme, Kili said the delay by both the national government and the county governments to resolve the issue of retirement benefits for County employees has seen the debt continue rising, even as members continue to retire into the Scheme’s payroll.

“One of the main challenges for the Scheme remains the issue of debt owed by sponsors. Late remittances of contributions and failure by some sponsors to remit members contributions in full have continued to exacerbate the situation. While part of the debt was inherited from the now defunct local authorities, some county governments have subsequently piled up a substantial amount of debt, post devolution,” said Kili.

He said some progress has been made both in reduction of historical and current unremitted contributions especially with the three largest sponsors to the scheme – Mombasa county government, Nairobi Water and Sewerage Company and Nairobi county government.

“It is anticipated that this trend will continue and therefore bring the issue of huge outstanding debts to a proper conclusion in the medium term, with the aim of reducing the current outstanding debt by 80 percent in the year 2017,” said Kili.

CPF Financial services is the administrator of LAPTRUST Scheme, which is now in its 87th year of service to the nation.

The Scheme has 83 sponsors which comprise 47 employers, who are the county governments and 36 associated organizations and other approved reciprocating bodies such as water companies and SACCOs.

Employees contribute to the Scheme at the rate of 12 percent of their pensionable salaries while the employers contribute at a rate of 15 percent of the employees’ pensionable salaries.

The scheme has recorded an increase in fund value by 6.6 percent, from Ksh22.4 billion as at 31 December 2015 to Ksh.23.9 billion as at December 2016.

Kili attributes the performance to fair value gains on the property investment portfolio and a cross sectional growth in other investments portfolio.

Notable among these is the redevelopment of the former Langata shopping centre, which significantly saw the value of that property rise owing to the ongoing development of residential and a shopping mall complex-the proposed Freedom Heights Mall and Residence.

The scheme has embraced an automated biometric register, allowing pensioners to be verified at the touch of a button through its branches across the country, greatly enhancing service delivery to the retired members across the country.

“Members can now access their membership details securely on both online and mobile platforms on the CPF application on the Google play store as well as the Apple App Store. The Administrator continues to run a country-wide branch network, aimed at bringing services closer to the people,” said Kili.

CPF Financial services individual pension scheme also realized positive  growth  in  a  majority  of  the  investment portfolios,  bringing  the  increase  in  net  assets  to  Ksh 396.2  million  as  at  31  December  2016,  compared  to Shs 212.9 million in the previous year.

Laptrust (umbrella) retirement fund (County Pension Fund) Scheme closed the year with a fund value of Ksh 2.0 Billion up from Ksh 726 Million for the same period in 2015.

The membership of the Scheme more than doubled from the year under review to stand at 18,304 as at 31 December 2016 up from 7,883 as at 31 December 2015.

The growth is attributable to the recognition and acceptance of the Scheme by county governments and other stakeholders as the Scheme enshrined in law under Section 132 of the County Governments Act.

Following a robust stakeholder consultative process spanning the last four years, the county governments as key stakeholders of the scheme, put forth a proposal to the Senate for enactment of the Laptrust Umbrella Retirement Fund (County Pension Fund) through an Act of Parliament.

This process was necessary to effect the recommendations of the stakeholders and to achieve uniform legislation for county pension arrangements.

The legislative process is in progress, and the Senate, being the house that legislates on matters affecting county governments, successfully legislated on the county pension scheme bill 2016 during this period, publishing it on December 2, 2016.

The CPS bill 2016 is now before the National Assembly for concurrence before it is ascended into law.

By Martin Mwita

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