Nairobi — The troubled Kenya Railways Staff Retirement Benefits Scheme has been put on notice over poor management of pensioners' funds.
The Retirement Benefits Authority (RBA) is investigating the scheme's board of trustees following complaints by pensioners of "gross misconduct" and irregular sale of properties.
On Friday, a senior RBA official confirmed that the board had been carrying out investigations and will make its findings public next month.
"The RBA has finished its inspection and the board and is considering what action to take against the scheme," said the official.
The official who asked not be named as he is not authorised to speak on behalf of the RBA, said investigations started when the Kenya Railways Pensioners Association raised the alarm over the irregular disposal of the scheme's properties.
The association's secretary-general Robert Azaria alleged that some of the properties were undervalued while others were unprocedurally leased to foreigners.
Mr Azaria said a prime property valued at Sh1 billion was leased to a foreigner for 26 years after he paid Sh100 million.
Bu the scheme's chief executive officer, Mr Mathews Tuikong denied any wrongdoing, saying the sale of properties was done in a transparent way.
The scheme owns prime properties in the city centre and its environs worth billions of shillings but owes its more than 9,000 members millions of shillings in pension arrears.
On Friday some of the pensioners in Nakuru threatened to go to court unless they were paid their dues immediately.
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Hi everyone seen the article above and wanted to comment as follows:- The Kenya Railways Staff Retirement Benefits Scheme was established as part of the Concession process and is expected to meet the recurrent pensions to the former Kenya Railways Corporation (KRC) staff including those transferred to the Rift Valley Railways as at the Concession date of November 2006. The Scheme is regulated by the Retirement Benefits Authority where the scheme has been registered with effect from May 2006. Assets valued at Kshs 12.4 Billion at the time of transfer were given to the Scheme. These assets have since been revalued and the current Book Value stated by Lloyd Masika as at June 2008 stated to be Kshs 17.1 Billion. ( see the list included in the audit report) At the Commencement of the Scheme it was anticipated that there would be contributions from members and the sponsoring employers but however this did not take place as the both the Kenya Railways and the Rift Valley Railways contracted new defined contribution schemes for the new service. It was also expected that the tenants would pay rents that would sustain the fund. This however is not sufficient since the houses transferred were dilapidated requiring redevelopment. The above mentioned situation created a deficit since the amounts required to meet a monthly pension wage bill from the rental income of Kshs 35million grew from Kshs 28 million at commencement to over Kshs 50 million today. The maximum that all the rent can be received from the asset before development is Kshs 35 Million. Another pressing concern was that at commencement the property had legal documents to be transferred and vacant possession to be attained from the former KRC staff and other agencies such as the police who were in occupation of the houses. An accumulated debt of over Kshs 400million is outstanding from this period owed by the KRC and the Railway Police. Discussions on settlement of this debt are on going though it inhibits the Scheme means to meet the pensions. An amount Kshs 5 million is usually paid which covers the current occupation. To remedy this position, the Scheme Board of Trustees with the assistance of its fund Managers and Actuaries identified a strategy that involved threes actions:- i. Lot I To refurbish some assets
ii. Lot II To Sell others
iii. Lot III To redevelop others through Joint ventures
At present, the refurbishment is on going in Chambilo Mombasa which is a World Bank project, the other asset to be refurbished is the Block D. of the Railways Headquarters. Both of these are done by the EATTFP and the scheme is not involved in the process except as the intended user. The Board of Trustees has a plan to dispose of Muthurwa estate as part of the South East Commercial Park Project, a 15 acre portion of the Muthurwa property was also surrendered to the Government to Build a Market and Bus park. An Amount of Kshs 650 Million has been paid and a balance of Kshs 325 million is expected for the remainder. The Board has also disposed an acre of the same property to Kenya Power and Lighting Company at a cost of Kshs 110 Million of which 100 million is paid and the remainder awaited once the transfer is completed.
a. The other disposal that has been completed is a sell of 4 acre plot in Nairobi West to the National Housing Corporation at a cost of Kshs 250 Million. This transaction is complete and the transfer is awaited.
b. The Board has also advertised sell of one property at Matumbato estate this is at commencement stage.
c. Finally, the Board of Trustees had participated in a joint project with the Kenya Railways Corporation on the Golf City project which unfortunately was unresponsive.
d. The Scheme has not sold the properties below market prices or below the book values in any instance.
On the Joint Venture projects there are three projects anticipated namely Makongeni (140 acres), Landi Mawe (50 acres) and Ngara (40 acres) the properties are at a feasibility study stage for development of concept designs and Expressions of Interest will be advertised once this is completed.
In summary the Scheme requires the payment of Kshs 325 Million from Local Government Kshs300 Million from the Kenya Railways and Kshs100 million from the Railway police. To wind up the transitional and start up challenges while it addresses its long term strategy on the Lot I, II & III mentioned in bullet 6 above. This amount would support the rental income and cushion against the redevelopment plans.
The Scheme only owes pension arrears the month of July which is the month not paid as at August 10. 2010. It also has plans to adjust the pensions at a rate of 3% increase which would create a need for about Kshs 450 Million to be paid to the members as adjustment.
I believe to the Best of my Knowledge that this Scheme is run professionally and there are no irregular or illegal activities carried out by either the Board or Management of the Scheme. The main challenge is cash flow constraints caused by the circumstances inherited at inception. I have enclosed the Draft Audit reports conducted by Deloitte on the Scheme in 2008 and 2009 for your view I will subsequently attach a signed final hard copy. With the letter to be sent.
Mathews K. Tuikong
Chief Executive Officer