Regional Bloc Roots for Pension Benefits Transfer Plan

Business Daily (Nairobi)

George Omondi

15 July 2011

Retirement scheme managers in East Africa have come under renewed pressure to allow cross-border transfer of workers’ benefits to encourage region-wide job hunting as member states allign national laws with the EAC treaty to create a single market.

Kenyan officials say the campaign to ease transfer of social security benefits – commonly known as benefit portability – has previously proved sensitive with almost all the national service providers resisting it.

Under a cross-border portability arrangement, accumulated retirement benefits of a citizen who gets jobs outside his/her national borders is automatically channelled to the new service provider in the host country, ensuring that all the terminal dues are available at the final state of retirement.

At the moment, any worker who gets a job outside Kenya has to leave the retirement savings account dormant with the existing scheme manager up to the time he/she returns to the country or upon retirement.

“The retirement benefit portability is seen as one way of promoting cross border job search as it saves the retired employees the agony of having to visit each of the pension and provident fund scheme scattered in all the countries worked,” said Mr Barrack Ndegwa, the integration secretary at Kenya’s EAC ministry, adding that the council called for a study to guide its rollout.

Kenya alone has more than 1,000 organisations that handle workers’ benefits that until recently resisted portability of benefits among themselves. Alex Kazongo, managing trustee of the National Social and Security Fund said service providers can only consider allowing workers to relocate with their retirement savings in the presence of a legal framework among EAC states. “Otherwise, the only instance when we consider paying Kenyans who get jobs in EAC is when they show us proof that their transfer is permanent,” said Mr Kazongo.

In such a case, a fraction of the accumulated savings is paid to the employee on condition that one will not come back in future to make further claims on the retirement benefits.

These views are echoed by industry regulator Retirement Benefits Authority (RBA) which links cautious attitude of service providers towards benefits portability to existing legal vacuum.

The EAC’s Capital Markets Development, Insurance and Pension Committee (CMIPC) charged with negotiating a legal framework for worker’s beneft portability is considering the European Union model that allows workers to migrate with their benefits from one state to the other member state.

Mr Edward Odundo, RBA CEO, said social security schemes that handle companies with branches across the region should find it easier to adopt the EU model once modalities are worked out.

“However, in cases where a worker leaves his home country for a job with new company in any partner state, the issue of portability becomes tricky because of different national laws involved,” Mr Odundo told the Business Daily Thursday.

The fresh push for cross-border portability of retirement benefits came up on Wednesday as Kenya unveiled, for public scrutiny, a draft Bill that seeks to harmonise national legislations with the EAC Common Market protocol. East African Community PS David Nalo said Tanzania, Uganda and Rwanda have also started aligning national laws with the protocol with overall aim of easing labour movement within the 127-million people market.

Kenya’s draft Miscellaneous Amendment Bill 2011 has suggested minor changes in the existing statutes to align some 27 pieces of national laws with the EAC treaty to eventually open up the Sh6.5 trillion ($73 billion) regional market for easy exchange of factors of production. The Kenya Federation of Kenya Employers Executive Director Jacqueline Mugo said the country must move with speed to harmonise employment policies with her neighbours to accord uniform treatment to region’s citizens in all the five member states.

At the moment, Kenya has the highest level of remunerations in the region, complete with liberal attitude and national culture that sharply contrast the kind of perception that Kenyan jobseekers face in other member countries.

More inviting

“As things stand now, Kenya appears more inviting to regional citizens than our citizens find partner states and this could result to a situation where everybody is coming in while no Kenyan is expressing interest in extending job search to other member states,” Ms Mugo said.

The government negotiators, she added, also need to spruce up their skills in engaging with their neighbours in the region to shatter the aura of suspicious that has always hung over Kenyan citizens in their regional pursuits.

The Central Organisation of Trade Unions (Cotu), Kenya’s umbrella body for workers’ union, has similarly called for uniform employment policies enable smooth movement of labour across the region.

Wafula wa Musamia, Cotu official, said the wage differential in East Africa are justified adding that high wages in Kenya is almost counterbalanced by the high cost of living.

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