NAIROBI, Kenya, Dec 14 – The Nairobi City Council said on Monday that it could pay Sh4 billion owed to two pension firms by the end of the current financial year.
Nairobi Town Clerk Philip Kisia said the Council was in negotiation with the Treasury and the Ministry of Local Government to allow it to pay the debt in one tranche.
“If I get approval from the parent ministry and Treasury, then I would be able to pay this money with one cheque by the end of the 2009/2010 financial year,” Mr Kisia said.
The Sh4 billion is owed to the Local Authorities Pension Fund Trust (LAP Trust) and the Local Authorities Provident Fund. Mr Kisia added that they were in talks with the two bodies to come up with an effective payment module that could be adopted unanimously.
“I would like to only pay the principal sum excluding the interest that has been accruing, but that is something we would have to sit down and agree on how to go about it,” he said.
Mr Kisia also revealed they were on course to paying pension arrears for council retirees falling in the 2007/2008 lot by February next year.
“We have cleared arrears up to the year 2006 and we shall be clearing 2007 and 2008 by February 2010,” he said.
He was speaking during the opening of a pension workshop organised by LAP trust.
LAP Trust Managing Trustee Hosea Kili challenged local pension fund companies to diversify their product portfolios in an effort of increasing pension penetration in Kenya.
Mr Kili said the lack of attractive investment packages from pension firms had made many people shy away from joining any pension scheme.
“Pension coverage in Kenya is so low that when I hear the Retirement Benefits Authority talk of promoting pensions I am motivated as a CEO to set channels to bring in all Kenyans into the scheme,” Mr Kili said.
He highlighted the growing number of young Kenyans getting into formal employment but were yet to join a pension scheme fearing to tie up money they could not easily access.
He said LAP Trust recently partnered with Housing Finance to offer asset backed financing for homes with plans to collaborate with other financial institutions to give its members better financial flexibility with their pension funds.
“We believe that it should be possible for members to use their pension funds to finance mortgages and we would like to look for other investment plans members can finance using their funds,” he said.