CPF unveils plan to recover Sh29b in outstanding debt
Steve Umidha @UmidhaSteve
The County Pension Fund (CPF) has announced a three-year debt recovery plan aimed at collecting over Sh29 billion in outstanding debts.
Hosea Kili, CPF Group CEO yesterday said that the fund, that was valued at Sh31.3 billion as at December 2020, would be worth over Sh60 billion were it not for the amounting debts, a chunk of which is owed by counties.
Speaking during the company’s Annual General Meeting (AGM) in Nairobi, Kili said the pension fund intends to fast-track recovery of the outstanding debts, adding that this is expected to take at least three years.
“The company will now embark on a rational debt-settlement pact that will involve signed agreements with Council of Governors (COG) and National Treasury in an attempt to recover the amounts accrued,” he said.
Kili said the agreement will pave way for possible payments through the National Treasury.
The fund blamed the scheme’s value of Sh31.3 billion up from Sh33.1 billion in the same period a year earlier, a 5.14 per cent drop, on more payouts upon exit from employment by retiring members, as well as the effects of the coronavirus pandemic.
Kili said this dented the investment environment which in turn yielded lower returns for the fund.
The fund also suffered from dilution by additional provisions for the outstanding contributions from sponsors amounting to Sh4.1 billion made during the year under review.
The arrears, according to Kili, are dated several years back when the local authorities pensions trust (LAPTRUST) ceased admitting new members.
Laptrust DB Scheme closed its doors to new members in 2011 and in a new Defined Contribution Scheme, Laptrust (Umbrella) Retirement Fund, was registered to meet the retirement needs of new employees within the then Local Authorities of Kenya.
Slow remittance
As a result, the change saw slow remittance of contributions by the defunct local authorities in addition to the initial delay by the county governments to handle inherited liabilities from the local authorities.
The County Pension Fund has over 160 sponsors comprising County governments and associated organisations as well as independent organisations which join the umbrella fund for their employees’ benefits.
Late remittances of contributions and failure by some sponsors to remit members contributions in full have continued to exacerbate the situation.
Active membership
During the year, pensioners in the LAPTRUST fund grew to 7,723 compared to 7,323 in 2019 while County Pension Fund’s active membership rose from 43,756 members in the year ended December, 31, 2019 to 49,813 as of the end of December 2020.
The fund’s Shariah compliant pension product, Salih grew its membership during the year under review to 7,466 up from 7,319 in 2019, while The CPF Individual Pension Fund’s active members grew to 12, 315 in the year ended 2020 compared to 5,989 members in year ended 2019. New membership, in the year under review, grew by 4,273.
Besides the debt collection process, the firm further aims to focus on three other strategic goals on financial resilience, enhancing investment returns and efficient and responsive service delivery.
CPF, a contributory retirement benefit scheme for County employees where both the employer and employee contribute for the benefit of the employee has ben diversifying in order to make decent returns for members.
