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Retiring civil servants are set to receive a significant boost to their pensions with the introduction of an automatic cost-of-living adjustment, should a new bill proposing this enhancement is passed by the house.

The Pensions (Amendment) Bill, 2024, once enacted into law, will not only ensure the financial security of retired public servants but also align their pensions with the current cost of living, thus enhancing their quality of life in retirement.

Sponsored by Matuga MP Kassim Tandaza Sawa, the Pensions (Amendment) Bill, 2024 seeks to amend the Pensions Act Cap 189, to include an automatic cost of living adjustment to the pensions earned by all retired public servants.

Amend act

Reads the bill: “The principal object of this Bill is to amend the Pensions Act Cap 189, to include an automatic cost of living adjustment to the pensions earned by all retired public servants In addition, the Bill seeks to provide for the use of the most current salary applicable to a job group as the basis for the calculation of the pensions payable to publisher v ants who have retired in that job group or its equivalent.”

In addition, the Bill seeks to provide for the use of the most current salary applicable to a job group as the basis for the calculation of the pensions payable to public servants who have retired in that job group or its equivalent.

 The Bill stipulates that any government officer entitled to pensions, gratuities, or other allowances under this Act shall receive an automatic cost-of-living adjustment increase when inflation rates justify such an adjustment.

“An officer who has been in service of the government shall be entitled to an automatic cost of living adjustment increase to the pension, gratuities or other allowances issued under this Act, where the rate of inflation is high enough to substantiate a cost-of-living adjustment increase,” the Bill read in part.

Price index

This adjustment will be calculated based on changes in the consumer price index over a 12-month period ending on June 30 each financial year.

“The automatic cost of living adjustment shall be calculated based on an increase in the consumer price index within a period of twelve months ending on the 30th of June in each financial year,” the Bill adds:

The Consumer Price Index which will be determined by the Kenya National Bureau of Statistics, as established under the Statistics Act. 

Additionally, the Cabinet Secretary will be responsible for publishing information regarding automatic cost-of-living adjustments in the Gazette. Importantly, these provisions will apply to government officers retiring after the commencement of the Act.

“The provisions shall apply to an officer who has been in service of the government who retires after the commencement of the act,” the Bill states.

The Bill defines the Consumer Price Index as an index number that measures a change in the prices of goods and services purchased or otherwise acquired by households and which are used directly or indirectly by a household to satisfy their own needs and wants. It also defines the cost of living as the amount required to cover basic expenses, including housing, food, healthcare, clothing, and education.

Whereas Cost of living adjustment has been defined to mean a change in income or benefits that correspond with the current rate of cost of living.