THE STATE’S RESPONSIBILITY IN PROVIDING

FOR THE SOCIAL WELFARE OF THE RETIRED

WORKER IN KENYA: AN ANALYSIS OF THE

REGULATORY FRAMEWORK

RESEARCH PAPER SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE

AWARD OF THE BACHELOR OF LAWS (LL.B) DEGREE COURSE

MAINA JESSICA KEMUNTO

MAY 2014UNIVERSITY OF NAIROBI

SCHOOL OF LAW

DECLARATION

I, Maina Jessica Kemunto, do hereby declare this dissertation to be my original work

and that it has not been submitted elsewhere nor is it due for submission for a degree

in any other institution.

Signed: .................................... Date: .............................

This dissertation has been submitted to me, Ms. Naomi Njuguna, for examination

with my approval as supervisor, University of Nairobi.

Signed: ..................................... Date: .............................

i

Dedication

To the Mainas

Dad for the choice of topic dear to you, Mum for your constant love & motivation, Lynda for showing me the way.

To the future generation: David, Rubi, Lauren and Evan.

ii

Acknowledgement

All possibilities start with God.

Ms. Naomi Njuguna for her guidance, knowledge and patience throughout

The friendship and camaraderie of those who encouraged me when the tank was running low

The University of Nairobi community without which I would not have met the spirit of the law

iii

Abstract

This research paper examines the avenues available for the Kenyan retiree to obtain

social welfare provided by the state. The need for such a study is established through a

background of the predicaments of retired persons in Kenya. The first chapter thus

elaborates on the background to the problem, the justification to the study, the

objectives of it and the methodology of this research. Chapter 2 subsequently

introduces the concept of social welfare, details its history as well as outlines certain

problems facing Kenyans at retirement. The essence of social welfare and its resultant

policy types are discussed with a view of understanding its development as a solution

for problems faced upon retirement. Chapter 3 outlines Kenyan legislation on the

matter and its implementation. It zeroes in on the level to which social welfare has

been catered for by the state through legislative developments over the years. A look

at legislative measures that are geared toward easing socio-economic concerns gives

an indication as to the social welfare environment presently subsisting in Kenya. A

comparative analysis between Kenyan social welfare policy and Australian retirement

social welfare is contained in the fourth chapter. This allows an evaluation of Kenya’s

position on the matter in contrast to global considerations on the matter. Conclusions

are then possible as to the level attained and subsequently the way forward as regards

the Kenyan retiree and the role social welfare can play in their golden years. Chapter 5

is thus a summary of the findings of the research. This includes an outline of the

downfalls as well as developments of social welfare available to retirees in Kenya. In

addition it contains propositions as to improvements that may be made in the

provision by the state of social welfare to retirees in Kenya.

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Table of Contents

Declaration..........................................................................................................................i

Dedication..........................................................................................................................ii

Acknowledgement............................................................................................................iii

Abstract.............................................................................................................................iv

1.0 Introduction to the Study.................................................................................................1

1.1 Introduction and Background to the problem..............................................................1

1.2 Statement of the Problem............................................................................................4

1.3 Justification of the Study.............................................................................................6

1.4 Research questions......................................................................................................7

1.5 Research Methodology................................................................................................7

1.6 Objectives of the Study...............................................................................................8

1.7 Limitations/Scope of the study....................................................................................9

1.8 Hypothesis and assumptions......................................................................................10

1.9 Theoretical framework..............................................................................................10

1.10 Literature Review..................................................................................................12

2.0 Historical Development of Social Welfare...................................................................14

2.1 Introduction...............................................................................................................14

2.2 The Evolution of Social Welfare...............................................................................14

2.3 Social welfare policies...............................................................................................17

2.4 Programmes in various welfare states.......................................................................18

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2.5 History of Social Welfare in Kenya..........................................................................21

3.0 The Legal Framework Relating to Social Welfare for the Kenyan Retired Worker.. . .23

3.1 Introduction...............................................................................................................23

3.2 The Constitution of Kenya 2010...............................................................................23

3.3 Employment Act CAP 226 Laws of Kenya..............................................................23

3.4 The Retirement Benefits Authority Act CAP 197.....................................................25

3.5 The National Social Security Fund Act CAP 258 Laws Of Kenya...........................26

3.6 The National Social Security Fund Act 2013............................................................27

3.7 The National Hospital Insurance Fund Act 1998......................................................30

4.0 Comparative Study: Retirement Systems of Kenya and Australia...............................35

4.1 Introduction...............................................................................................................35

4.2 The Australian Retirement Model.............................................................................35

4.3 The Contributions of New Zealand towards Comfortable Retirement.....................36

4.4 A comparison of the Kenyan and Australian retirement situation............................37

4.5 Conclusion.................................................................................................................38

5.0 Summary, Recommendations and Conclusion.............................................................39

5.1 Summary....................................................................................................................39

5.2 Conclusion.................................................................................................................44

5.3 Recommendations.....................................................................................................40

6.0 Bibliography..................................................................................................................46

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1.0 Introduction to the Study

1.1 Introduction and Background to the problem

This dissertation consists of an analysis of the social welfare legislation in Kenya; zoning in

on its presence, applicability and effectiveness over retirees in Kenya. It further pinpoints the

gains thus far made and the possible improvements on the identified legislation when

contrasted with similar legislation and practice of the Australian jurisdiction.

An understanding of social welfare and its origins and the benefits of welfare is helpful in

understanding the need to consider Kenya’s position on the matter. Also, it gives justification

for the fronting of the provision of welfare by the state to the retired as a solution to problems

that will be established to be facing them.

Thus, social welfare is the provision of a minimum standard of living among the citizens of a

nation. As it is plays a part in the protection of citizens, it is mainly the function and duty of

the State. It however is also provided by non-governmental organizations, religious groups,

social groups, etc. The services offered include universal healthcare and one form or the other

of unemployment insurance.

The concept of social welfare can be said to have been practised in the Roman Empire under

the emperor, Augustus, who provided a meal of corn to the poorer citizens of the empire1.

Around 1000AD, the Song Dynasty government in China supported programs such as the

establishment of retirement homes, public clinics, and paupers' graveyards. These acts and

the groups of persons it targeted have seen these categorized as early signs of social welfare 1 “Britannica Encyclopedia,” accessed January 27, 2014, www.britannica.com.

1

by the state. The English Poor Law of 1601, which gave parishes the responsibility for

providing welfare payments to the poor and the 19th century Poor Law Amendment Act,

introducing the system of workhouses were the initial shows of social welfare in England.

Under Islamic practice, there is the concept of zakat which is a charitable contribution made

by the able. It is one of the Five Pillars of Islam and has been collected by the government of

Muslim states since the time of the Rashidun Caliph Umar in the 7th century. The taxes were

used to provide income for the needy, including the poor, elderly, orphans, widows, and the

disabled2.

It can be seen that social welfare becomes relevant when it applies to special needy groups in

society. Retired persons can be seen to fall under this category for two reasons; their

unemployment as well as them being elderly. Persons at and beyond the point of retirement

are met by various challenges as they attempt to sustain their prevailing way of life into their

retirement. This often involves challenges at the various levels of human living including

mentally, emotionally, spiritually and quite significantly; economically and socially.

As stated, social welfare or social security as a concept involves the protection of the basic

needs of individual citizens within a society, allowing them to maintain a minimum standard

of living within that society. With the majority of Kenyans living within poverty levels, and

unable to acquire for themselves the requirements of everyday such as three square meals,

healthcare and education; social welfare provision by the state becomes a common concern,

hoping for it as a form of sustenance or at least relief.

The problem of unemployment among the youth has been widely considered. This remains an

important matter to consider. However, if the number of adults who are not in employment

2 Shadi Hamid, “An Islamic Alternative? Equality, and Redistributive Justice, and the Welfare State in the Caliphate of Umar,” Renaissance: Monthly Islamic Journal no. 13(8) (August 2003).

2

due to various reasons were to be considered, the worry of unemployment may quickly divert

its attentions. For instance, in 2014 an estimated 20,000 people will retire from the civil

service3. When numbers of the estimated retired from the private sector are put into play as

well as the surviving retired from past years, the number of retired can be said to be of greater

worrying significance.

This is because; almost all Kenyan adults aged 35 and above have from one to hundreds of

persons who look upon them to provide for their various needs. Therefore, although the youth

do undoubtedly hold the future, this future is supported by the quality of the foundation

offered to the youth. The youth are thus evidently dependent on the standards accessible to

their parents and guardians. This becomes even more increasingly true due to the increasing

age levels of dependents occasioned by youth unemployment, and in turn the increase in age

of those being depended upon. This vicious cycle may therefore require nipping the bud, that

is, a look at the foundation the youth are receiving from parents and guardians supporting

them on mostly insufficient pensions for example. Kenya is said to face extreme levels of old

age poverty in the next 20 years as the number of people above 60 years doubles with no

corresponding increase in pension coverage4

Having considered this, the relatively low retirement age in Kenya is of significance. The

retirement age for many years stood at 55 years of age. Effective April 1 20095, it was pushed

up to 60 years. This however is still a level to be put up for debate. Since the retirement age

will evidently be maintained as relatively low as it is, it will thus not be the concentration of

this research. Instead, the prevalent plight of retired Kenyan workers shall be looked into.

Identifying this, as well as the developments that may have been made under Kenyan law so

3 JEVANS NYABIAGE, “State’s Pension Bill Balloons with 20,000 New Retirees,” Standard Newspaper, June 26, 2013.4 Steve Mbogo, “Millions Faced With Poverty Trap Upon Retirement.,” Business Daily, April 13, 2009.5Monica Were, “THE CONCEPT OF RETIREMENT AGE: A COMMENTARY” (Research & Development Department, RBA.

3

as to address the issues, may enable the identification of remaining gaps in legislation. Since

employment laws may not be adequately directed to retirement so as to be relevant or

effective enough, a look especially into social welfare legislation could be a way out for

them.

There are various statutes relating to the provision of social welfare. These include; the

National Health Insurance Fund Act, the National Social Security Fund Act, the Pensions

Act, the Retirement Benefits Authority Act, and even a consideration of tax reliefs under

Kenya’s tax legislation. The Constitution of Kenya 2012 for instance caters for social welfare

under article 43, providing for minimum standards of healthcare, housing, education, food

and water and even states under art. 43(3) that the State shall provide appropriate social

security to persons who are unable to support themselves and their dependants’6.Also,

international conventions on social security, redundancy, retirement and old age as adopted

by Kenya can be a tell-tale on the current vigour applied to the provision of needs to the

retired.

1.2 Statement of the Problem

The problem is that there seems to be a gap in legislation relating to retirees in Kenya. Global

standards have over the years have taken this group of persons to require special

consideration7 in terms of care due to being in the category of the elderly as well as the

unemployed, and thus afforded them certain rights and privileges.

Kenya however can be seen to be lagging behind in the adoption of such considerations. With

1.6 million Kenyans being aged 60 years and above and estimated to reach 3.4 million by

20308; while pension coverage growth is merely 100,000 people per year and currently

6The Constitution of Kenya, 2010.7“ILO,” accessed December 2, 2013, www.ilo.org.8“UN,” accessed April 6, 2014, www.un.org. United Nations Department of Economic Social and Cultural Affairs

4

standing at 3.8 million9 there is an apparent show of the on-going imbalance in the country.

This has left a large number of Kenyans who enter into retirement languishing in poverty and

unable to sufficiently sustain not only their needs but also those of their dependents. For

instance, research of retired teachers under the Teachers Service Commission has shown that

such person’s standards of living have reduced greatly upon retirement due to insufficient

pensions and lack of adequate social welfare measures10.

Legislation on social welfare includes the NHIF Act, the Retirement Benefits Authority Act,

the Constitution of Kenya 2010, and most recently the National Social Security Act 2013.

Although there has been numerous provisions to establish pension schemes, healthcare under

the above, legislation on its enforcement and that creates adequate standards is still wanting.

The level of inadequacy for instance can be seen by the repeal of the National Social Security

Fund Act in favour of the NSSF Act 2013. This was necessary to establish a viable pension

scheme under the Fund11. NSSF’s offering of Sh80, 000, as lump sum payment upon

retirement is insufficient for the prevailing cost of living. The new bill includes provisions

such as a 6% compulsory contribution from both the employee and the employer12. This is in

contrast to the previous standard amount of 200 Kenya Shillings.

The state cannot turn a blind eye as this scenario is increasingly duplicated all around the

country. The state thus may need, based on its mandate in the protection of its citizens, to

provide social security to the retiree. More importantly may be, if the need is established, the

extent to which the state is responsible in order to establish a minimum standard for these

citizens. Thus the question becomes to what extent a retiree can lay claim under law as to

9“Retirement Benefits Authority,” accessed January 7th, 2014, http://www. rba.go.ke.10Ciriaka Tirindi Kithinji, “Aging and Retirement in Kenya; Focus on Aging and Retired Teachers Under the Teachers Service Commission (TSC),” http://ir-library.ku.ac.ke/handle/123456789/4864/.11“Business Daily Africa,” accessed November 30, 2013, http://www.businessdailyafrica.com.12“Citizen TV News,” December 5, 2013, www.citizennews.co.ke/.

5

their entitlement to provision of certain services for maintenance of their basic needs or, at

the minimum, a subsidy to such services.

1.3 Justification of the Study

This study is justified on the basis that there appears to be a gap in labour legislation.

Legislation dealing exclusively with the state’s role in provision of basic social amenities at

the point whereby employment is no longer possible due to attainment of a specified

retirement age cannot be easily pinpointed. As it has been stated, retirement majorly affects a

person both socially and economically. Due to this, retirement falls under socio-economic

matters in a society.

Although statistics show that there are a substantial number of the Kenyan workforce being

retired annually, and thus a large percentage of the Kenyan population consists of retirees and

their dependents, there has not been much national discussion into the role to be played by

these citizens nor as to the role the state must then take up in order to ensure that a chunk of

its population does not delve into poverty, ill health and sometimes inevitably, unwarranted

early demise13.

This research is also backed by both the Millennium Development Goals, one being the

global eradication of poverty14 as well as Kenya’s Vision 2030 which backs a similar mission

and additionally considers the importance of establishing an effective system of social

security15 within the country. These two make considerations for special groups in society

thus provide a basis for a look into the provision of minimum living conditions for the retired.

13 R.H. Haveman, Poverty: Measurement and Analysis: International Encyclopedia of the Social & Behavioral Sciences, 2001.14“UN Millenium Goals,” UN, November 20, 2013, www.un.org/millenniumgoals.15“Kenya’s Vision 2030,” November 20, 2013, www.vision2030.go.ke.

6

Analysis and recommendations concerning this socio-economic aspect and consequently its

scope under socio-economic laws governing it, is thus necessary in the establishment of the

best way forward in attaining assistance for this significant group of persons in our society.

1.4 Research questions

1. What is social security?

2. What is retirement?

3. What are the major challenges faced by retirees? Do these challenges include the

retirement age itself?

4. What effects do these challenges have?

5. What is the purpose/aim of social security laws?

6. Have social security laws met their purpose?

7. What lessons can Kenya learn from the Australian laws on social security and retirement?

1.5 Research Methodology

The method I will be using for this research is mainly qualitative. This is because by doing a

mainly qualitative research, I will be able to effectively obtain the information I require for

my research while still meeting my research objectives within my research limitations. This

qualitative portion will be done by selecting secondary sources of information that are

relevant to my research; reading them, analysing and editing it into useful material capable

of answering the research questions raised by my area of interest. These secondary materials

may include scholarly books, journals, the internet and articles, e-books or e-journals

contained in it.

In order to allow for deeper and current insight into my area of research, I will supplement

the above secondary materials with a few primary sources of information on my research area

7

where possible. These sources may include an interview with a person competent and

experienced in dealing in a social security provision organization. This interview may be

carried out by asking questions from a questionnaire that I may prepare. This will allow me to

get the general mind-set of persons actually involved in the provision and administration of

national social welfare and in particular the extent to which they give specialized

consideration to their retired clientele.

Also, I may conduct a focus group of my peers in the University Of Nairobi School Of Law

and/or other youth who are currently dependents on persons who are retired. This can help

me determine the concerns of retirees that stem not only from themselves, but also from their

dependents, and thus the effect of retirement on the Kenyan society as a whole.

1.6 Objectives of the Study

By carrying out this research, I intend to create greater awareness for the rising commonness

of problematic living situations faced by numerous households due to a breadwinner attaining

the retirement age, and thus no longer being catered for by the earnings and allowances

formerly accruing due to their employment.

Having established a problem, an objective of this research would then be to establish the

need for state intervention in the eradication or at least the minimization of these problems 16.

This can be enhanced by coming up with recommendations of possible inputs of statutory and

practical assistance that can be introduced which targets the retired in Kenya.

1.7 Limitations/Scope of the study

The scope of this study in terms of geographical consideration will be limited mainly to

Kenya. This is because the laws that largely impact my immediate society, which I thus wish

16 “Funding Social Services: A Historical Analysis of Responsibility” (Victoria University Press, November 9, 2013), www.victoria.ac.nz.

8

to improve, are Kenyan laws. In order to identify some of the possible gaps in Kenyan law

however, I seek to consider the laws of another jurisdiction that has previously considered a

system to aide their retirees live a relatively comfortable retirement17. For this reason I will

also consider the relevant portion of the retirement and social welfare legislation and practice

found within Australia.

The lack of willingness of interviewees; including retired persons, social security

professionals and focus group participants, to answer questions or answering inaccurately.

This will hinder the accuracy of the research in establishing the current positions on the

issues being researched.

Having experienced directly the challenges faced by retirement of a breadwinner within the

household, the research may (due to this researcher) to some extent subconsciously be biased

towards the view that there always arise challenges due to retirement. This view overrides the

stance that is sometimes argued that where there is adequate preparation by the retiree for

retirement, standards of living whether mental, emotional, or even financial need not change.

Coming from my inherent standpoint due to personal experiences however, the research may

in some instances unintentionally show a pre-emption of the need for review of policy

consideration and changes regarding the handling of retirement in the country.

1.8 Hypothesis and assumptions

Retirement is mainly seen as a phenomenon that brings with it negative consequences

especially economically

Social welfare has not been well established in Kenyan society to be group-specific18,

including retired persons’ needs

17 Catherine Baab-Muguira, “Want a Comfortable Retirement? Move to Australia,” AOL.com (May 3, 2013).18 “The NSSF Bill 2013: Contents and Policy Issues” (Institute of Economic Affairs, October 29, 2013).

9

The establishment of effective social welfare mechanisms by the state would eliminate a

large chunk of problems facing retirees19

A look at the Australian jurisdiction on their approach in caring for the retired could give

insight20 on the gaps within the Kenyan situation on the same and thus could give

substantial recommendations for Kenya

The retirement age of 60 years stipulated by law for most formal sector jobs is low 21, and

its increase could better work to improve the retirement situation currently seen.

1.9 Theoretical framework

The theoretical framework to be used for this research will be the theory of social justice.

This theory has been propounded by John Rawls and David Miller. It proposes that every

person in society shares a common humanity and thus has a right to equitable treatment,

support for their human rights, and a fair allocation of community resources22. It advocates

that there should be neither discrimination nor restraint of one’s welfare and well-being on

the basis of gender, religion, political affiliations or even race or age23.

The theory of social justice is relevant to this research as it not only calls for equality but also

insists on the need to give care to the least advantaged members of society. This theory can

consequently be seen to be a basis for the establishment of social security systems, as well as

for the identification of special needs groups in any given society such as the category of the

elderly retired.

In addition the theory of social contract will be tied in with that of social justice. This theory

propounded by Jean-Jacques Rousseau, Hugo Grotius, Immanuel Kant among others. It

19 “A Brief History of Health and Care Funding Reform in England” (Socialist Health Association, 2013).20 Baab-Muguira, “Want a Comfortable Retirement? Move to Australia.”21 Were, “THE CONCEPT OF RETIREMENT AGE: A COMMENTARY.”22 Matthew Robinson PhD., “PhD What Is Social Justice?,” 23 Matthew Clayton and Andrew Williams, Social Justice (Wiley, 2004).

10

proposes that persons in society surrender their power to a sovereign in exchange of

protection from that sovereign for the entire society24.

This theory is relevant to the research as it establishes that the authority that a state has is

only due to it being given such by the people it governs. Also, that this authority is to be used

for the benefit and protection of its citizens. This theory can thus be seen as the basis for the

establishment of the concept of social security and social welfare.

The theory of equity supports the distribution of a country’s resources among all the people

in a way that gives consideration to any special circumstances of individuals.

The natural law theory is based on the use of moral principles to determine the law25. This

theory is beneficial to the research as it encourages standpoints of humanity and the moral

consciousness of society to provide for those who are less able such as the elderly.

The special interests group theory justifies the categorization and assistance of special

groups in society. This will be necessary to show that retired persons and their predicament

should be looked at so as to establish ways to prevent the problems and aide them to continue

living comfortably in society.

1.10 Literature Review

Kenyan statutes to be used to collect data for this research include the NHIF Act, the NSSF

Act, the Pensions Act, and the Retirement Benefits Authority Act. These statutes contain

the position that has been taken in Kenya by the state as to the extent to which it will

intervene in the provision of social services to its citizens. Repealed statutes contrasted to the

24 Anthony A. D’Amato, Jurisprudence: A Descriptive and Normative Analysis of Law (Martinus Njihoff, 1984).25 Anthony A. D’Amato, Jurisprudence: A Descriptive and Normative Analysis of Law (Martinus Njihoff, 1984).

11

current statutes allow a show of the gaps have been plaguing the success of social welfare in

Kenya.

Especially useful for this research, analysis of the aforementioned will allow for the

determination of whether social welfare legislation identifies specific groups of persons in

society with special needs. Identifying for instance whether retirees have been given any

special mention or consideration will be made possible by a review of the various statutes.

International conventions on social security, redundancy, retirement and old age to which

Kenya is a party, or otherwise, will establish the global standards desired for the world’s

citizens, and in particular for the retired. This will enable the gauging of where Kenya

currently stands and the direction it needs to take as it seeks to develop in the area of social

security.

Tolley’s Employment Handbook 19th Edition by Elizabeth Slade QC (Oxon) Barrister and

specifically chapter 41 that covers retirement will be used to give a deeper understanding to

the concept of retirement. It brings up the issue of retirement age and employment protection,

early retirement and benefits after retirement as well as introduces pensions. It also does an

analysis of the Employment Equality (Age) Regulations 2006. This will provide a foundation

to the concept of social security to the retired. Elizabeth Slade debates the issue of whether

retirees face a type of employment discrimination that will form a firm basis as to the real

plight of the retired.

Employment Law by Gwyneth Pitt covers the area of retirement and age discrimination. It

further discusses various issues arising at retirement. This will serve this research by

questioning considerations as to whether retirees need to be catered for by their governments

in a specialized way to curb some of the issues shown to be faced universally. Aspects of

12

social welfare covered in this text aide in the establishment of the prevailing global social

standards for the elderly.

Learned Helplessness after Retirement: The Case of Rural Retirees In Kihumbui-ni

Location, Murang'a County, Kenya: Wachira, Miriam Wanjiku (2012) is a research carried

out by a University of Nairobi. This research will assist in establishing that there is actually a

problem among retirees that requires redress. Specifically it establishes the ambiguity of the

role of the retired in Kenyan society. The author establishes a case for the low level of the

retirement age in Kenya and the need to establish alternate uses for the knowledge and skills

of experienced retired persons.

Role of social protection on nutritional status of elderly persons: the case of Imenti

north district, Kenya Mwenda, M K is also a research by a University of Nairobi student. It

brings up the issue of social protection and its necessity due to it being the major viable

solution to the problems of persons above 60 years. The author brings out the troubles

reflected across Kenya that go beyond public administration issues and delve into the

situation facing retirees at a personal level. The author further proposes measures that can be

taken to eliminate these trials, and is relevant to this research as it establishes the benefit of

state-provided social welfare in the improvement of standards of living for these persons.

13

2.0 Historical Development of Social

Welfare

2.1 Introduction

In order to establish a case for the establishment, restructuring or enforcement of social

welfare in Kenya, it is essential to establish the history behind the evolution of the concept of

social welfare. The historical development will answer questions arising such as:

- What brought about the need for social welfare?

- To who in the society was social welfare targeted?

- What models of social welfare were established and adopted in the various founding

states?

- Did the establishment of social welfare aide in solving the problems sought to be

addressed by its introduction?

2.2 The Evolution of Social Welfare

Social welfare arose logically, if not spontaneously, from the very nature of modern society.

Whatever its local variations, modernity everywhere involves urbanization, industrialization,

and loss of family and local community economic support. Workers are consequently

exposed to a variety of hazards (most notably illness, unemployment or injury on the job);

previously perceived as family and community responsibilities26. In the same vein, the life

phases before and after market employment, that is youth and old age, also require

26 Elna C. Green, Before the New Deal: Social Welfare in the South, 1830-1930 (University of Georgia Press, 1999).

14

protections as substitutes for the family/community goods and services available in simpler

times.

This however is not simply a phenomenon found in modern times. Social welfare can be

pointed out from aeons ago, taking various forms in the different eras and localities. In the

Roman Empire for instance, the first emperor Augustus provided the 'congiaria' or corn dole

for citizens who could not afford to buy food27. Social welfare was subsequently enlarged by

the Emperor Trajan. Trajan's program brought acclaim from many, including Pliny the

Younger.

In the Eastern hemisphere, the Song dynasty government (c.1000AD in China) supported

multiple programs which could be classified as social welfare, including the establishment of

retirement homes, public clinics, and paupers' graveyards.

Religious groups, based on their founding principles of morality and compassion, have

played a massive role all through in providing for the needy groups in society. The medieval

Roman Catholic Church for instance operated a far-reaching and comprehensive welfare

system for the poor.

Early welfare programs in Europe included the English Poor Law of 1601, which gave

parishes the responsibility for providing welfare payments to the poor. This system was

substantially modified by the 19th-century Poor Law Amendment Act. The new legislation

introduced the system of workhouses28.

Generally speaking, before the Great Depression, most social services were provided by

religious charities and other private groups. Changing government policy between the 1930s

and 1960s saw the emergence of a welfare state, similar to many Western European

27 Richard Duncan-Jones, Money and Government in the Roman Empire (Cambridge University Press, 1998).28 “A Brief History of Health and Care Funding Reform in England.”

15

countries. Most programs from that era are still in use, although many were scaled back

during the 1990s as government priorities shifted towards reducing debt and deficits29.

It was predominantly in the late 19th and early 20th centuries however that an organized

system of state welfare provision was introduced in many countries30. The World Wars had

evolved states into more responsible global actors whose citizens were at the core of their

sovereignty31. Social and economic rights therefore became not just an option by national

bodies but rather an international obligation of states as under the 1948 United Nations

Declaration of Human Rights32.

Developments thus were seen to spring up across the nations. Otto von Bismarck, Chancellor

of Germany, introduced one of the first welfare systems for the working classes. In Great

Britain the Liberal government of Henry Campbell-Bannerman and David Lloyd George

introduced the National Insurance system in 1911, a system later expanded by Clement

Attlee. These can also be seen to be the initial steps towards employee rights that were quite

necessary due to industrialization.

The United States inherited England's poor house laws and has had a form of welfare since

before it won its independence. During the Great Depression, when emergency relief

measures were introduced under President Franklin D. Roosevelt, Roosevelt's New Deal33

focused predominantly on a program of providing work and stimulating the economy through

public spending on projects, rather than on cash payment.

In the Islamic world, Zakat (charity), one of the Five Pillars of Islam, has been collected by

the government since the 7th century. The taxes were used to provide income for the needy,

including the poor, elderly, orphans, widows, and the disabled. According to the Islamic jurist 29The Economist, “Capitalism and Its Critics,” May 2014.30 Green, Before the New Deal: Social Welfare in the South, 1830-1930.31 Clayton and Williams, Social Justice.32“UN.”33 Green, Before the New Deal: Social Welfare in the South, 1830-1930.

16

Al-Ghazali, the government was also expected to store up food supplies in every region in

case a disaster or famine occurred34.

Welfare can take a variety of forms, such as monetary payments, subsidies and vouchers, or

housing assistance. Welfare systems differ from country to country, but welfare is commonly

provided to individuals who are unemployed, those with illness or disability, the elderly,

those with dependent children, and veterans. Retired persons thus fall in these special needs

groups to whom the evolution of welfare can be said to have been necessitated.

There is however need for constrain in the eligibility of persons so as to benefit those who

actually require it rather than simply opt for it over other more viable sources of income.

Welfare is seen to be provided by governments or their agencies, by private organizations, or

a combination of both. Funding for welfare usually comes from general government revenue,

but when dealing with charities or NGOs, donations may be used. It is however important for

state parties to provide this to needy citizens across the board in line with its responsibilities

under the theories of social contract and social justice.

2.3 Social welfare policies

As already pointed out, social welfare refers to publicly financed and administered programs

designed to meet basic needs inadequately met through the market system35. Social welfare

policies are thus the laws which when administered determine the standards of welfare for the

various groups of citizens. They are important in distinguishing the nature of different states,

and hence the classification of whether a state is a welfare state or not. These policies are the

creation and adaptation of various state organs and processes including legislative, political,

administrative and even judicial.

34Patricia Crone, “Medieval Islamic Political Thought,” Edinburgh University Press (2005): 308.35“SOCIAL WELFARE POLICY,” Michigan State University pg. 11

17

The legislature plays a major role in establishing the standard of welfare in the country.

Legislators being both law-making as well as political in nature36, and socio-economic rights

being greatly influential of the election of these law-makers by the citizens, the policies

manifested reflect economic reasoning as well as social interests tailored to the contemporary

societal needs.

The application of these policies required there to be established criteria by which persons

were eligible to benefit from these programs. The criteria that has been widely accepted and

practised is the use of citizenship firstly, then contributions and lastly the “means” test.

Welfare benefits are awarded by the state mainly to the citizens of that state as it is charged

with the responsibility of ensuring a minimum quality of life for the persons under its care

and protection. Thus retired citizens of a country by mere citizenship have a claim to welfare

made available to the public at large.

Other than that, persons may claim welfare from the state on the basis that they made

contributions towards such benefits. This usual constitutes the bulk of welfare in a country. It

entails an employee and/or an employer making payments towards a fund to be used in case

of unemployment or old age.

Eligibility via the “means” test is established by demonstrating need according to

government-mandated criteria37.

2.4 Programmes in various welfare states

In the United States the term welfare may either refer to means-tested cash benefits,

especially the Aid to Families with Dependent Children (AFDC) programme and its

successor, the Temporary Assistance for Needy Families Block Grant, or it can be used to

36 “SOCIAL WELFARE POLICY. Michigan State University”37“Britannica Encyclopedia.”

18

refer to all programs, including, for example, healthcare through Medicaid, Obamacare and

food and nutrition programs (SNAP)38.

AFDC was created during the Great Depression to alleviate the burden of poverty of families

with children and allow widowed mothers to maintain their households. Prior to this, anti-

poverty programs were primarily operated by private charities or state or local governments;

however, these programs were overwhelmed by the extent of need during the Depression.

Alimony is still a practice of a few states including New Jersey, Florida and Oregon which

entails the provision of welfare for one by another.

In Canada, welfare usually refers specifically to direct payments to poor individuals (as in

the American usage) and not to healthcare and education spending (as in the European

usage)39.The Canadian social safety net covers a broad spectrum of mainly province-run

programs, due to it being a federation. Canada has a wide range of government transfer

payments to individuals, which totalled $145 billion in 200640. Only social programmes that

direct funds to individuals are included in that cost. Other programmes including Medicare

and public education are additional as they are provided generally to its citizens. The State

can thus be seen to have given great attention to provision of welfare to its citizens.

Social welfare in Sweden is made up of several organizations and systems dealing with

welfare. Funding is done by taxes, and executed by the public sector on all levels of

government complimented by private organisations. It can be separated into three parts

falling under three different ministries: social welfare, falling under the responsibility of

Ministry of Health and Social Affairs; education, under the responsibility of the Ministry of

Education and Research and labour market, under the responsibility of Ministry of

38Katz, Michael B. (1988). In the Shadow of the Poorhouse: A Social History of Welfare in America. New York: Basic Books39Parl.gc.ca40Government transfer payments to persons, Statistics Canada

19

Employment41. Government pension payments are financed through an 18.5% pension tax on

all taxed incomes in the country, which comes partly from a tax category called a public

pension fee (7% on gross income), and 30% of a tax category called employer fees on

salaries (which is 33% on a netted income). Since January 2001 the 18.5% is divided in two

parts: 16% goes to current payments, and 2.5% goes into individual retirement accounts,

which were introduced in 200142. Money saved and invested in government funds, and IRAs

for future pension costs, are roughly 5 times annual government pension expenses. The

Swedish system is elaborate but ensures low cost in the administration of pensions and

welfare.

New Zealand is often regarded as having one of the first comprehensive welfare systems in

the world. During the 1890s a Liberal government adopted many social programmes to help

the poor who had suffered from a long economic depression in the 1880s. One of the most far

reaching was the passing of tax legislation that made it difficult for wealthy sheep farmers to

hold onto their large land holdings. This and the invention of refrigeration led to a farming

revolution where many sheep farms were broken up and sold to become smaller dairy farms.

This enabled thousands of new farmers to buy land and develop a new and vigorous industry

that has become the backbone of New Zealand's economy to this day43. This liberal tradition

flourished with increased enfranchisement for indigenous Maori in the 1880s and women.

Pensions for the elderly, the poor and war casualties followed, with State run schools,

hospitals and subsidized medical and dental care. By 1960 New Zealand was able to afford

one of the best-developed and most comprehensive welfare systems in the world, supported

by a well-developed and stable economy44.

41“Sweden Government,” accessed April 30, 2014, http://www.government.se.42“ILO.”43The Economist, “Capitalism and Its Critics.”44 Ross Guest Professor of Economics Griffith University, “COMPARISON OF THE NEW ZEALAND AND AUSTRALIAN RETIREMENT INCOME SYSTEMS” (Commission for Financial Literacy and Retirement Income, February 2013).

20

The United Kingdom has a long history of welfare, notably including the English Poor laws

which date back to 153645. After various reforms to the program, which involved

workhouses, it was eventually abolished and replaced with a modern system by laws such as

National Assistance Act 194846. The welfare system comprises expenditure by the UK

government on health, education, employment and social security.

The system has been successful as it has seen the nationalization of essential services rather

than the costly and gruesome task of establishing state facilities from the ground up. This can

be seen for instance through the National Health Service that is state-owned and is accessible

to all persons across the United Kingdom47.

2.5 History of Social Welfare in Kenya

Kenyan retirees, just like retirees globally face a number of problems. These include risks

such as sudden loss of life, loss of the usually anticipated regular salary, anxiety about

housing, dwindling status, decreased strength and deteriorated health, physical disabilities

and aging48. To curb these problems, the state has been charged under the Constitution to

protect its citizens I any lawful manner possible. Social welfare has arisen globally as a

means to doing so.

Kenya’s development in relation to public social welfare is attributable to the introduction of

various legislations. However, the fact cannot be ignored that customs of the various Kenyan

communities had practices reflective of global and modern social welfare. For instance,

harvests were stored in bountiful times and these distributed on command of the council of

45 “A Brief History of Health and Care Funding Reform in England.”46“WBG Website,” World Bank Group, accessed April 14, 2014, http://siteresources.worldbank.org/WBI/Resources/wbi37202.pdf.47 “About the NHS” (United Kingdom Department of Health, June 2012).48 Theresa Onyinye, “Problems and Prospects of Retirement Adjustment on Families of Retirees Among Civil Servants in Ekiti State, Nigeria” (University of Ado-Ekiti, 2011).

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elders or monarchy to persons across the kingdom that drought or floods had left hungry49.

Also, the elderly and young were cared for by the able-bodied who would ensure the needs of

the entire community were maintained.

Religious groups, from the age of missionary conversion to modern churches, temples and

synagogues have practised charitable acts and established charitable institutions whose ends

have become reliable as welfare to many. In addition, private steeps by private sector

stakeholders through CSR, as well as NGOs, have been the sources of major welfare

measures for the different needs groups within Kenyan society.

In the 1990s Kenya saw the advent of various legislations on social welfare including the

National Social Security Act that brought the concept of contributions of the employed

towards a pension, the National Hospital Fund that allows persons to contribute toward

insurance for medical services, the Pensions Act that regulated management of pension

schemes. Other contemporary forms of social welfare include programmes such as the free

primary education system introduced in 2003. These form the state-provided forms of social

welfare in Kenya.

49 “Rights of Indigenous Peoples: Kenya - Kenya Draft ILO Study Database,” accessed April 16, 2014, www.chr.up.ac.za.

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3.0 The Legal Framework Relating to Social

Welfare for the Kenyan Retired Worker

3.1 Introduction

Various provisions found under different Kenyan statutes have contributed to developments

in the state of social welfare policy in Kenya. Below is outlined such provisions and the

relevant legislation availing social welfare upon retirement.

3.2 The Constitution of Kenya 2010

Welfare being a socio-economic right, it is provided for by Chapter V of the Constitution.

Under article 43(1), the rights to the highest attainable standard of health, housing, freedom

from hunger, clean and safe water, education and social security is awarded to every citizen.

These make up the claims thus that retirees may make in the pursuit of a decent quality of

life. The State charges itself with the responsibility of providing appropriate social security to

those unable to support themselves and their dependants50.

Through the labour relations rights under article 41 and further under the Labour Relations

Act No 14 of 2007, in the course of employment a worker may negotiate for fairer pension

terms as well as other retirement benefits via collective bargaining agreements by

involvement of trade unions and employers’ organisations.

3.3 Employment Act CAP 226 Laws of Kenya

In considering the framework for provision of social welfare in retirement, it is essential to

consider that the course of the employment is relevant in establishing the systems put in place

for determination of benefits that are to accrue at retirement. The Employment Act details

forms of employment and thus types of employees, minimum terms of the contract of service,

50The Constitution of Kenya art. 43(3).

23

and consequently considerations for retirement under the different circumstances of

employment.

A written contract of service51 is required to contain terms and conditions relating to pensions

and pension schemes52. This establishes an obligation for an employer to provide for the

pension of the employee from the initial stage of employment, and for the employee to accept

or refuse these alongside other terms of service laid out in the contract. Other than these

express terms being stated by the employer, where the pension rights to an employee of a

body or authority depend on the terms of a pension scheme established under any provision

contained in or having effect under any Act; the body or authority may be required to give to

a new employee information concerning the employee’s pension rights or the determination

of questions affecting those rights as stipulated in such a statute.

3.4 Pensions Act Cap 189

An Act of Parliament to provide for the grant and regulating of pensions, gratuities and other

allowances in respect of the public service of officers under the Government of Kenya.

ss. 4 on the Benefits charged on Consolidated Fund states that all pensions, gratuities or

other allowances granted under this Act shall be a charge on the Consolidated Fund.

ss. 5 on pension as of right states, “Every officer shall have an absolute right to pension and

gratuity and the right conferred shall not apply in respect of compensation for past services,

nor shall anything in this Act affect the right of the Government to dismiss any officer at any

time and without compensation. However Where an officer has completed five years of

pensionable service, the benefits accruing to the officer under this Act shall vest in that

officer and shall become payable in such manner and at such times as may be determined

under this Act.

ss. 10 on Minimum and maximum pensions provides A pension granted to an officer under

this Act shall not be less than two thousand shillings or such other amount as may be

specified by the President from time to time, but shall not exceed the full pensionable

emoluments drawn by the officer at the time of his retirement.51 A contract of service as provided for by Section 9(2) of the Employment Act is a written contract for service for a period or a number of working days which amount in the aggregate to the equivalent, of three months or more; or which provides for the performance of any specified work which could not reasonably be expected to be completed within a period or a number of working days amounting in the aggregate to the equivalent of three months52 Employment Act CAP 226 Laws of Kenya s. 10(3)(a)(iii)

24

ss.10A on the Deferment of pension states that Where an officer retires from the public

service before attaining the age of fifty years, the payment of the pension benefits granted at

the time of retirement shall be deferred until such officer attains the age of fifty years, except

in the following cases— where the officer retires before completion of ten years of service;

where an officer retires because of medical incapability; or where there are dependants upon

the officer’s death53; The pension payable where any deferment of payment arises shall be

estimated based on projected pensionable emoluments from the date of retirement until the

officer attains the age of fifty years, according to such procedures as may be specified in

regulations.

Suspension of pension on re-employment under ss. 12 provides that where an officer to

whom a pension has been granted under this Act is appointed to another office in the public

service, the payment of his pension, or any part thereof, may, with his consent, if the

President thinks fit, be suspended during the period of his re-employment.

3.5 The Retirement Benefits Authority Act CAP 197

This Act establishes and governs the Retirement Benefits Authority. The authority is

mandated to regulate retirement benefits schemes. Its establishment was necessary so as to

protect the investments Kenyans make for their sustenance after retirement. Its mission thus

is to not only safeguard and supervise, but also to develop the Kenyan retirement benefits

sector through commitment to continued excellence in service delivery54.

The object and functions of the Authority are the regulation and supervision of the

establishment and management of retirement benefits schemes, protection of the interests of

members and sponsors of the retirement benefits sector, promotion of the development of the

retirement benefits sector, and to advise the Minister on the national policy to be followed

with regard to retirement benefits schemes and to implement all Government policies relating

thereto55.

53 Ss. 19A-Payment of dependant’s pension shall be done within a period of ninety (90) days after the death of the officer concerned, failing which interest shall accrue thereon at bank rates until payment is made in full: Provided that no interest shall be payable under this section where the failure to pay is occasioned by legal proceedings in respect of payment.54 “Retirement Benefits Authority”55Retirement Benefits Authority ActCAP 197, sec. 5.

25

In order to emphasize the weight of the Authority’s duty to safeguard retirement benefits,

section 15 provides that the Act shall not relieve the Authority of the liability to pay

compensation or damages to any person for any injury to him, his property or any of his

interest caused by the exercise of any power conferred by the Act or any other written law or

by the failure, whether wholly or partially, of any works.

Article 37 provides that schemes are to invest the capital contributed, maintaining the capital

and giving returns from those investments back to the beneficiaries. Schemes are thus not

only to be a store of these benefits but aspire to grow their beneficiaries’ savings. This is

important as these savings are susceptible to inflation and other economic factors that may

cause them to lose value over time.

The Act has provided that it is mandatory for retirement benefits schemes, managers,

custodians and administrators to be registered by the Authority in order to run such schemes.

Registration of officers of these schemes is an assurance of the competency of such persons,

and that such persons can be held accountable in case of breach. The Authority thus has the

power to refuse registration for schemes and persons that do not qualify the requirements of

the Act.

In addition, the Authority has the powers to inspect schemes and appoint interim

administrators, to hear appeals, and file proceedings to recover deductions from employers.

Finally, the Act has provided punitive measures under section 53. It states that a person

commits an offence and shall be liable, on conviction, to a fine not exceeding one hundred

thousand shillings, or to imprisonment for a term not exceeding one year, or to both for any

offence under the Act.

3.6 The National Social Security Fund Act CAP 258 Laws of Kenya

By means of this Act the National Social Security Fund was established. The Fund has the

core function to have paid into it all contributions and other payments required by the Act and

secondly to ensure all benefits and other payments required by the Act be paid out of the

Fund to the contributors or their beneficiaries56.

The reasons necessitating such a Fund include:

•Raising national savings56 The National Social Security Fund Act, LAWS OF KENYA, 1978.

26

•Securing retirement for working population

•Old age poverty relief

•Savings and growth cycle57

This Act has now been repealed with the enactment of the 2013 NSSF Act to which greater

consideration will be given.

3.7 The National Social Security Fund Act 2013

The National Social Security Fund Act CAP 258 as explained has governed the Kenyan

social security system for over 30 years. Due to the changing socio economic as well as

political dynamics of Kenya however, there has been a need for an overhaul of social security

legislation in Kenya. This has seen lengthy revision of the law. The NSSF Act 2013 can thus

be said to be a product of gradual evolution of the needs of Kenyans for a more reflective

social security system. The Kenyan National Social Security Fund Act 2013 was assented to

on 24 December 2013, and its date of commencement was 10 January 2014.

The Act had the task of fulfilling the following in order to successfully be a tool for reform in

the area of social security in Kenya:

Replace predecessor established by CAP 258

Provide policy to improve adequacy of benefits

Include self-employed persons

Provide full opt-out for employers at Tier II58 level59

Increase membership coverage of the scheme;

Improve adequacy of benefits paid out;

Bring into the ambit of social security self-employed persons and their dependants;

57“The NSSF Bill 2013: Contents and Policy Issues.”58 Tier II refers to persons with contributing to other registered pension schemes other than the NSSF59“The NSSF Bill 2013: Contents and Policy Issues.”

27

Operate and manage a value adding scheme by ensuring the funds are sustainable and

affordable and retaining the Old Provident Fund to avoid transferring old liabilities to

the new fund;

Ensure that the liabilities of the Old Provident Fund are settled within a period of 5

years from commencement

The above is thus the objectives of the Fund as outlined in the Act.

The Act provides that any person employed in Kenya and subject to the Employment Act

must contribute to the NSSF60. This includes all public servants, including the military and

police, other than those exempted under any other statute. Every employer in Kenya must

also make contributions to the NSSF in respect of their employees. Existing members of the

NSSF, other than voluntary members, will thus become members of the new NSSF Fund.

The Act now provides that there shall be individuals exempted from contributing to the Fund

include:

i) Persons who are specifically exempt under any International Convention

ii) ii) Persons who are not ordinarily resident in Kenya and employed for periods not

exceeding 3 years at any one time and who contribute to a social security fund of

any country approved by the Cabinet Secretary61

The Act has increased the amount to be contributed for each employee. An employee is to

contribute at the rate of 6% of pensionable earnings while the employer is also to contribute

at the rate of 6% of the employee’s pensionable earnings in the form of an annuity or income

draw-down, bringing the total contribution rate to 12%. These mandatory contributions are

60 National Social Security Fund Act, 2013.61“NSSF Act 2013” (Actuarial Services (E.A) Ltd, January 23, 2014).

28

debited into the Pension Fund. These contributions may earn interest under the new

provisions.

Members who have been contributing to the Pension Fund will be entitled to receive benefits

based on their Pension Fund Credit upon62:

a. their retirement at age 60

b. on early retirement from age 50

c. on retirement due to permanent incapacity

d. In the event of disability that results in a member being unable to earn a

reasonable livelihood.

The manner in which benefits become accessible under the Act is by buying an annuity from

a licensed insurer or being paid as an income draw down63.A survivors benefit based on a

member's Pension Fund Credit plus a funeral grant of KES 10,000 will also be payable if a

member dies before accessing their benefits64.

Some other succinct features are that a member emigrating permanently from Kenya may

also receive his benefit in the form of a cash lump sum. For those contributing voluntarily

into the Provident Fund on the other hand; they shall be entitled to receive as a cash lump

sum their Provident Fund Credit upon:

a. attaining the age of 50 years; or

b. if the member ceases to be self-employed;

c. or in the event of permanent incapacity or

62 National Social Security Fund Act.63 An income draw-down is an arrangement where the benefit to a member is paid in the form of regular amounts for example, on a monthly basis. The balance of the benefit that remains in the pension scheme continues to accrue interest. However, the amount of the regular payment is not guaranteed and may be increased or even reduced if investment returns of the pension scheme, amongst other factors, are significantly differently from expected64“The NSSF Bill 2013: Contents and Policy Issues.”

29

d. In the event of disability that renders the member unable to earn a reasonable

livelihood.

The 2013 Act can be seen to have incorporated considerations of the current economic

situation in the country. Although it has been argued that the rate of contribution is

detrimental to the quality of life of the worker in the course of their employment, there are

retired persons whose struggles in old age can testify to the need for such contributions that

could adequately impact their needs and vulnerabilities. Furthermore, in a situation where the

cost of living and hence the state’s economic health were comfortable, citizens would rather

maintain a similar quality of life both in employment and upon retirement at the cost of the

stipulated contributions.

3.8 The National Hospital Insurance Fund Act 1998

This Act establishes the National Hospital Insurance Fund. It is a scheme whose aim is the

access to healthcare for all through provision of insurance available in times of need of

medical attention. Persons thus contribute towards the Fund to this end.

There have arisen over the years numerous alternatives to this fund. Due to hurdles including

untimeliness of payouts by the Fund, numerous scandals such as of embezzlement, low

payouts, as well as political interference; Kenyans have lost faith in the Fund. However, the

Fund remains the most accessible to persons from all walks of life and with benefits of

membership including65:

• NHIF provides an inpatient cover of up to Ksh. 396,000 per year for the

contributor, spouse and children.

• In comparison to private insurance schemes, the contributions are low and thus

accessible to many more Kenyans, both employed and unemployed

• Provides comprehensive medical cover in certain hospitals across the country.

65National Hospital Insurance Fund Act, 1998.

30

• It works with a wide network of over 400 accredited Government, private and

mission health providers spread across the country.

• The Fund reimburses hospital claims as per agreed daily rebates.

• Covers maternity cases.

• NHIF does not exclude any disease

Notwithstanding, the Act is argued to be overdue for review to be able to cater for current

economic and medical considerations. The Act does not contain considerations of payouts for

non-contributing retirees. Amendment is thus further necessary for protection of vulnerable

groups such as the retired who would require medical care even more as they grow old and

reliant on social and state care.

3.9 Equality of Treatment (Social Security) Convention, 1962

In this Convention the term legislation includes any social security rules as well as laws and

regulations. The term benefits refer to all benefits, grants and pensions, including any

supplements or increments and the term benefits granted under transitional schemes means

either benefits granted to persons who have exceeded a prescribed age at the date when the

legislation applicable came into force, or benefits granted as a transitional measure in

consideration of events occurring or periods completed outside the present boundaries of the

territory of a Member. The term death grant means any lump sum payable in the event of

death.

The following branches of social security are to be obligated by the member states with

effective operation through legislation covering its own nationals within its own territory:

i. Medical care;

ii. Sickness benefit;

iii. Maternity benefit;

iv. Invalidity benefit;

31

v. Old-age benefit;

vi. Survivors benefit;

vii. Employment injury benefit;

viii. Unemployment benefit; and

ix. Family benefit

The provisions of this Convention apply to benefits granted under transitional schemes to be

found in the legislations passed by the member states, which shall communicate to the

Director-General of the International Labour Office through a statement indicating the

benefits provided for by its legislation.

3.10 Invalidity, Old-Age and Survivors' Benefits Convention, 1967

Part 3 of this convention covers old age benefits. Article 15 states that The contingency

covered shall be survival beyond a prescribed age and The prescribed age shall be not more

than 65 years or such higher age as may be fixed by the competent authority with due regard

to demographic, economic and social criteria, which shall be demonstrated statistically.

It also required that if the prescribed age is 65 years or higher, the age shall be lowered, under

prescribed conditions, in respect of persons who have been engaged in occupations that are

deemed by national legislation, for the purpose of old-age benefit, to be arduous or unhealthy.

Article 18 provides that the contingency shall be secured at least where the person has

completed, prior to the contingency and in accordance with prescribed rules, a qualifying

period which may be 30 years of contribution or employment, or 20 years of residence; or

where a prescribed qualifying period of contributions while he was of working age has been

paid.

3.11 Maintenance of Social Security Rights Convention, 1982

32

Article 6 provides that each Member shall endeavour to participate with every other Member

concerned in schemes for the maintenance of rights in course of acquisition, as regards each

branch of social security and for which every one of these Members has legislation in force,

for the benefit of persons who have been subject successively or alternately to the legislation

of the said Members.

Article 8 provides for the schemes for the maintenance of rights in course of acquisition

referred to in Article 6 of this Convention which shall determine the formula of awarding

invalidity, old-age and survivors’ benefits, and pensions, in respect of occupational diseases,

as well as the apportionment, where appropriate, of the costs involved.

Article 14 provides that each member state is to promote the development of social services

to assist persons covered by this Convention, particularly retirees, in their dealings with the

authorities, institutions and jurisdictions, particularly with respect to the award and receipt of

benefits to which they are entitled and the exercise of their right of appeal, as well as in order

to promote their personal and family welfare.

3.12 Social Security (Minimum Standards) Convention, 1952

This convention provides for the conditions set out for the security of the persons protected

under the provisions of benefits in respect of medical care, sickness benefit, unemployment

benefit, old-age benefit, employment injury benefit and any other benefits that may be

prescribed by the ILO or the member states.

3.13 Domestic Workers Convention, 2011

This convention being mindful to the commitment of the International Labour Organization

to promote decent work for all, through the achievement of the goals of the ILO Declaration

on Fundamental Principles and Rights at Work and the ILO Declaration on Social Justice for

33

a Fair Globalization, and recognizing the significant contribution of domestic workers to the

global economy, which includes increasing paid job opportunities for women and men

workers with family responsibilities, greater scope for caring for ageing populations,

children and persons with a disability.

4.0 Comparative Study: Retirement Systems

of Kenya and Australia

4.1 Introduction

As elaborated in Chapter Two, there are various social welfare policy models. These are

dependent on the social, economic and political factors prevalent in the specific country. In

order to establish thus the social welfare approach taken up by a country, it is of essence to

view it against the backdrop of those which have taken up a different variant.

34

Australia is not only the home of the koala, the kangaroo, and the duck-billed platypus, but

may also be home to that other rare and exotic animal: the secure retirement66. Having

established its welfare system quite early and very authoritatively globally, it provides a

suitable contrast to the Kenyan system to which I wish to establish its advancements so far as

well as areas for possible improvement.

In order to further contribute to possible adaptations, it is worthwhile to incorporate aspects

of the New Zealand social welfare and retirement system which differs in certain aspects

from both the Kenyan and Australian systems and which has gained profound acclaim

worldwide.

4.2 The Australian Retirement Model

Australia’s age pension is means-tested. It is thus available to persons on a need basis. Its

system also involves a compulsory employer funded superannuation scheme, the

Superannuation Guarantee (SG). Superannuation arrangements are government-supported

and encouraged, and there are minimum provisions compulsory for employees. Employers

are required to pay a proportion of an employee's salaries and wages of 9.25% into a

superannuation fund. In addition, people are encouraged to put aside additional funds into

superannuation. January 2014 saw the introduction of the MySuper product into which

employers are required to pay default contributions to. The minimum obligation required by

employers is set to increase to 12% gradually between 2013 and 2020 with an aim to increase

the retirement benefits to accrue upon retirement.

Adequacy is a crucial factor in determining the success of a pension system. Australia is

growing towards a rate of 90% of the pre-retirement income67. The higher the percentage, the

66Baab-Muguira, “Want a Comfortable Retirement? Move to Australia.”67 Ross Guest Professor of Economics Griffith University, “COMPARISON OF THE NEW ZEALAND AND AUSTRALIAN RETIREMENT INCOME SYSTEMS.”

35

less the adverse effects of retirement. This being almost at optimum, it can be seen to be

establishing an environment where standards of living do not change drastically and retirees

may remain in control of their upkeep.

The Australian system includes subsidiary legislation that requires the provision of retirement

homes in each state, the provisions of certain subsidies through designated stores,

establishment of recreational facilities for the retired and elderly as a whole.

4.3 The Contributions of New Zealand towards Comfortable Retirement

Firstly, the system is a universal one thus available to all citizens without consideration of

other factors68. Another key feature of this system is the employer funded superannuation

scheme, the KiwiSaver. It is not compulsory in the sense that employees are automatically

enrolled but can opt out. However where they do not opt out both employees and employers

are required to contribute69.

The scheme has been used by the political forces as well to control inflation and reduce

interest rate increases70. It therefore brings about twofold benefit; both upon retirement and to

New Zealanders as a whole. The system is also widely emulated for its economic efficiency

in the provision of welfare. This results in higher returns for the beneficiaries due to the

reduction of administrative costs.

4.4 A comparison of the Kenyan and Australian retirement situation

The National Social Security Fund under the NSSF Act 2013 and the Superannuation

Guarantee under the Superannuation Guarantee (Administration) Act of Australia are similar

in that they establish a compulsory employer funded scheme. Employers in both cases are

68Ross Guest Professor of Economics Griffith University, “COMPARISON OF THE NEW ZEALAND AND AUSTRALIAN RETIREMENT INCOME SYSTEMS” (Commission for Financial Literacy and Retirement Income, February 2013)69“KiwiSaver,” accessed May 18, 2014, https://www.kiwisaver.govt.nz.70“Budget 2014: Don’t Expect Any KiwiSaver Changes,” The New Zealand Herald, May 12, 2014.

36

responsible for ensuring that each employee is a member to the fund and that contributions

are remitted regularly or else be held criminally liable.

The projected rate of the Kenyan pension scheme under the NSSF is 6% of pre-retirement

income. This pales in comparison to the 90% of the Australian scheme. Whereas, the

Australian system provides for maintenance of roughly the same pre-retirement quality of

life, the Kenyan system works to provide a supplementary kitty for the retirees. This raises

the question of where then the retired, especially the Tier I contributors are to source their

main sustenance upon retirement.

Whereas the Australian system delves not only into economic aspects of retirement but also

social ones, Kenya is seen to lack considerations for the social needs that arise at this stage of

life. It is argued that the economic capacity of Kenya cannot allow for such a stretch. It

however cannot stand strong against the reality of the vulnerability of the aged in the country

who require care as well as protection of their standing in society.

4.5 Lessons and Conclusion

The contributions of both Australia and New Zealand provide a diverse enough selection for

research, testing and possible adoption by Kenya.

Australia can be seen to have provided for its retirees a more comfortable retirement than

many countries including Kenya due to more financial security, better tax laws, and a

generally higher standard of living71.Its government policy and its longer journey of social

welfare reforms have made it possible. Additionally its flourishing stock market has seen

great retirement benefits due to successful investment of contributions. Kenya may want to

adopt applicable policies to ensure a thriving economy upon which welfare can be catered

for.

71Baab-Muguira, “Want a Comfortable Retirement? Move to Australia.”

37

The establishment of minimum standards of welfare, even for low-income earners, is vital to

ensure a decent standard of living for all income categories of workers. This is essential as all

retirees face the same predicaments and costs especially in relation to modern healthcare.

There are also social aspects in Kenya that still need consideration. These include the

establishment of state-run old age homes, subsidies for the retired as well as incorporation of

the retired in both social and political posts, in order to ensure the representation of their

needs.

5.0 Summary, Recommendations and

Conclusion

5.1 Summary

Retirement is a period in which a worker finds themselves in unchartered waters. It brings

about an array of challenges to which the person may no longer have the control or economic

power or influence to rely on self-help. As in other situations of vulnerability, the citizens

then look upon the Sovereign to make use of the might collectively ceded to it so as to protect

those needs unique to their situation.

38

The law comes in with various methods to ease the situation. Social welfare thus develops

and evolves to cater for the needs of the people to the capacity its economy will allow. This is

evidenced by the social welfare policies that a country adopts.

Kenyans have reprieve from laws that provide them with access to information, protection of

their retirement contributions, and access to healthcare, among others. The road ahead is

however still winding despite developments such as the 2013 NSSF Act.

Working towards attainment of global standards is a strength of Kenya’s and could see future

it achieve better quality of life not just for the retired but for its citizens as a whole.

5.2 Recommendations

• Despite there being numerous legislation relevant to retirement, there is room for

further consolidation of retirement legislation which would create greater

clarity in the resolution of situational challenges facing them

• In relation, there is need for establishment of a single authority capable of

investigating and formulating on the broad array of retirement matters. The

Retirement Benefits Authority came as a saviour to many Kenyans losing out on

their hard earned savings due to unscrupulous pension schemes. However, there

are still many other aspects to retirement including social ones such as the role of

the elderly in a decreasingly sociable culture.

• Another option may be to increase the mandate of the Retirement Benefits

Authority, it being the major authority charged with matters solely of retirement.

39

Its establishment on the values of transparency, accountability and oversight

would be beneficial not only to pension scheme management but also

management of other specialised benefits to the retired such as healthcare

provision and maintenance of social amenities countrywide such as retirement

homes.

• The relevant ministries namely the Ministry of Labour as well as the Ministry of

Gender, Social Development and Children Affairs should be tasked with the

adoption and implementation of well formulated legislative provisions. There

should also be established subsidiary bodies to carry out research to determine the

effectiveness of legislation and make appropriate recommendations for

amendment.

• Strategic planning on increasing the retirement age. There remains great minds

being unexploited due to a relatively low retirement age. At 60, there are many

able-bodied persons whose years of experience retain great benefit to the society

but are barred by the impending ceasing of their employment. It may further be a

reason for low morale and decreased productivity as the final years approach as

opposed to old age

• Partnership between the public sector with both private sector and

nongovernmental organisations. The involvement of these parties will not only

incorporate their expertise in order to develop the best model possible for

retirement in Kenya but it will also ease the burden on the government and

consequently on the taxpayer. Bodies such as the United Nations Development

Programme for instance, have wide knowledge and scope to aide in the realization

of an effective retirement model for Kenya in the pursuit of achieving the

Millennium Development Goals and Kenya’s Vision 2030.

40

• The importance of matters relating to the elderly can be said to be ignored or

undermined in comparison to those of other special groups in society. This for

instance can be seen by the presence of a Ministry for Youth Affairs but little

importance for the affairs of the over 60s whose contribution to heritage and

cultural matters should be tapped for smooth generational transition as well as a

reserve of knowledge otherwise lost in a generation.

• The government should minimize the bottleneck that is usually involved in

payment of social security and pensions72. Such payment should be possible

within a month of leaving service

• Provision of finances, tax exemptions and subsidies for the elderly. It is

essential for protection of the country’s over 60s. However, little benefit can arise

where there is general high cost of living and inflation. The state should thus

ensure financial security, better tax laws, and a generally higher standard of living

for all its citizens.

• The encouragement of early investment for retirement: This will ensure that

they not only rely on their contributions or state subsidies but have other sources

of retirement income.

• Establishment of fully equipped housing estates/retirement homes, recreation

centres and other specialized amenities for the retired. At par with economic factors,

social problems are both a cause and a result of the retiree’s predicament. As such, the

government should establish specialized recreational facilities to occupy and aide the

retired.

72 Onyinye, “Problems and Prospects of Retirement Adjustment on Families of Retirees among Civil Servants in Ekiti State, Nigeria.”

41

Challenges Kenya may face in the implementation

Socially

- Contemporary Kenyan culture has moved away from its community- based approach

and rather depicts more individualistic tendencies. This is a hindrance to socialisation

and values such as respect for the elderly. Neglect of the old is thus prevalent and

reflects in the lack of urgency to adopt policies to cater for the elderly due to views of

them being a burden rather than valuable contributors to society

- Kenya can also be said to lack a strong culture of social work. It will therefore be

difficult to implement programmes to cater effectively for the elderly. Fields of study

dealing with social work are thus unpersuasive for pursuit to many.

- There is also the challenge of rural-urban migration of the able-bodied while the

elderly seem to be following the pattern of urban-rural migration. Finding a balance

so as to ensure this does not frustrate the efforts thus far made for the urbanization of

rural areas may be problematic. This in turn will lead to inadequate amenities for the

migrating retiree.

- The move to cater specifically for the retired may be viewed as a move to rob the

youth of resources they have fought for over the years. This may create further rift

between the age groups and eliminate any goodwill subsisting between them.

Politically

- Legislators have the difficult task of balancing both their legislative role and the

political nature of that role. For instance proposals of higher taxes in order to increase

government budgeting for welfare may not sit well with already pressed taxpayers.

Future legislation is thus highly dependent on the prevailing political atmosphere.

42

- There may also be difficulty establishing a national system of social welfare due to

the diverse communities represented by the county system of governance as well as

divergent economic policies of the constituent county governments.

Financially

There are high monetary costs to be incurred to implement the changes required to establish

better social security and welfare in Kenya73. These costs may be detrimental financially to

the following parties:

- Taxpayers to whom the financial obligations of the state will be transferred

- The retirees themselves and workers in general, as higher contributory rates will be

imposed to mostly insufficient salaries in the course of employment

- The economy as a whole as it will be burdened by the recurrent expense of providing

and maintaining social welfare

5.3 Conclusion

Retirement as a concept is necessary. It facilitates transition in the job market between

successive generations. In addition, it enables the aging to enjoy their golden years. This

however is only possible where they have conditions are conducive for such enjoyment. This

is the role of a thriving social welfare system.

In Kenya, there are an increasing number of persons grappling with hard economic times

resulting from the general increased cost of living. Furthermore burdens of increasingly

higher age of dependents finds them in a more urgent position to have the economic muscle

to fend for their needs as well as that of their loved ones. This has seen persons who should

73 NYABIAGE “State’s Pension Bill Balloons with 20,000 New Retirees”

43

be enjoying the fruits of their labour instead diving back into the workforce further

heightening the crisis that is youth unemployment.

From both an economic and social view thus, a situation arises where it is thus prudent to

protect and provide certain material needs for those in retirement by those able-bodied

majority who can have the two-fold benefit of replacing their predecessors in more available

employment as well as gaining valuable experience through transition from willing elders

readied by a comfortable retirement.

African countries including Kenya awoke to the importance of such a system, proven by the

various provisions outlined in Chapter 3 of this study. However, as with all other

advancements including technological, health-related and economic, there need be constant

reaction by lawmakers that can reflect in the legislation for a more conducive social situation.

With increasing worries about the state of pension funds and care for the elderly by the

society, practical steps need be taken with urgency to recoup lost time and the resource of our

retired citizens. Both the systems of Australia and New Zealand provide a diverse enough

selection for research, testing and possible adoption by Kenya. Some of the lessons include

that for there to be achievable reforms to improve the standards of living of the retired, there

need be general growth of the country as a whole. This involves increased financial security,

better tax laws, and a generally higher standard of living74 for all Kenyans.

The task lies with legislators to bridge the gap between the youth and the elderly by keeping a

step ahead so as to curb preventable societal unrest and rather tap into their diverse

contributions. Despite it being an uphill task, good legislation coupled with effective

institutional backing to administer legislative adjustments, will see Kenya establish itself as

an authoritative example of an environment suitable for retirement.

74 Baab-Muguira, “Want a Comfortable Retirement? Move to Australia.” para. 5.

44

6.0 Bibliography

Textbooks

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Duncan-Jones, Richard. “Money and Government in the Roman Empire” Cambridge

University Press, 1998

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Green, Elna C. Before the New Deal: Social Welfare in the South, 1830-1930. University of

Georgia Press, 1999

Haveman, R.H. “Poverty: Measurement and Analysis: International Encyclopaedia of the

Social & Behavioural Sciences” 2001.

Articles

Baab-Muguira, Catherine. “Want a Comfortable Retirement? Move to Australia.” AOL.com

(May 3, 2013).

“Budget 2014: Don’t Expect Any KiwiSaver Changes.” The New Zealand Herald, May 12,

2014.

The Economist “Capitalism and Its Critics,” May 2014.

“Funding Social Services: A Historical Analysis of Responsibility” Victoria University Press,

November 9, 2013. www.victoria.ac.nz

Hamid, Shadi. “An Islamic Alternative? Equality, and Redistributive Justice, and the

Welfare State in the Caliphate of Umar” Renaissance: Monthly Islamic Journal no. 13(8)

(August 2003)

Mbogo, Steve. “Millions Faced With Poverty Trap Upon Retirement.” Business Daily, April

13, 2009.

NYABIAGE, JEVANS. “State’s Pension Bill Balloons with 20,000 New Retirees.” Standard

Newspaper, June 26, 2013.

Robinson PhD., Matthew. “PhD What Is Social Justice?,”

Documents

46

“A Brief History of Health and Care Funding Reform in England” Socialist Health

Association, 2013

“About the NHS” United Kingdom Department of Health, June 2012

“NSSF Act 2013” Actuarial Services (E.A) Ltd, January 23, 2014.

“The NSSF Bill 2013: Contents and Policy Issues” Institute of Economic Affairs, October 29,

2013.

“Rights of Indigenous Peoples: Kenya - Kenya Draft ILO Study Database.” Accessed April

16, 2014 www.chr.up.ac.za

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ZEALAND AND AUSTRALIAN RETIREMENT INCOME SYSTEMS”

Commission for Financial Literacy and Retirement Income, February 2013

“SOCIAL WELFARE POLICY” Michigan State University

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& Development Department, RBA

Internet Sources

“Britannica Encyclopaedia” Accessed January 27, 2014

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www.citizennews.co.ke/

“ILO” Accessed March 8, 2014

47

www.ilo.org

“Kenya’s Vision 2030” November 20, 2013

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http://www.un.org

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Statutes

The Constitution of Kenya, 2010

The National Hospital Insurance Fund, 1998

The National Social Security Fund Act Laws of Kenya, 1978

The National Social Security Fund Act, 2013

Retirement Benefits Authority Act 1997

Equality of Treatment (Social Security) Convention, 1962

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Invalidity, Old-Age and Survivors' Benefits Convention, 1967

Maintenance of Social Security Rights Convention, 1982

Social Security (Minimum Standards) Convention, 1952

Domestic Workers Convention, 2011

Theses

Kithinji, Ciriaka Tirindi. “Aging and Retirement in Kenya; Focus on Aging and Retired

Teachers Under the Teachers Service Commission (TSC),”

http://ir-library.ku.ac.ke/handle/123456789/4864/.

Onyinye, Theresa. “Problems and Prospects of Retirement Adjustment on Families of

Retirees among Civil Servants in Ekiti State, Nigeria” University of Ado-Ekiti, 2011

49