Kenyan Pensioners Set To Earn More As National Assembly Proposes Inflation Adjustments On Pensions

• The National Assembly proposes adjustment in pensions to align with inflation, rising living costs, and increased income taxes
• The Finance and Planning Committee suggests reviewing pension adjustments every five years
• Stakeholders also proposed the creation of a Tax Refund Fund to address the persistent backlog in tax refunds to Kenyans

Elijah Ntongai, a journalist at TUKO.co.ke, with more than three years of expertise in financial, business, and technology research, provides profound insights into both Kenyan and global economic trends.

Retirees are set to see an increase in their earnings after the National Assembly proposed a provision for inflation adjustment in pensions.

The National Assembly Finance and Planning Committee tabled its report on the Draft National Tax policy before parliament, and one of the major proposals provided on pension is to have it adjusted for inflation and reviewed once every 5 years.

The committee argued that this would allow pensioners to keep up with inflation rates and the high cost of living as well as increased taxes on income.

“Provides for inflation adjustment in pension and allow for review of the same every five (5) years to keep pace with inflation, the rising cost of living, the increasing tax burden and other payroll-related levies that individuals, particularly those in formal employment, must bear,” the report stated.

Kuria Kimani, MP for Molo moved a motion regarding the adoption of the Report of the Departmental Committee on Finance and National Planning on its consideration of Sessional Paper No. 2 of 2023 on the National Tax Policy

The National Tax Policy was presented to the National Assembly by the Leader of the Majority Party on April 27, 2023 and thereafter was committed to the Departmental Committee on Finance and National Planning for consideration.

Challenges identified

The tax policy identified several key challenges within the tax system, including increasing tax expenditure, complexities in taxing emerging economies like online businesses, low tax compliance, challenges in international taxation, a lack of guidelines for treaty negotiation, and delays in settling tax disputes.

Resolutions to tax challenges

To address the issue of unpredictable tax rates, the policy recommended a comprehensive review of taxes every five years.

Stakeholders advocated for the establishment of criteria for granting exemptions and tax incentives. Concerning tax refunds, stakeholders suggested creating a Tax Refund Fund to address the persistent backlog in tax refunds.

Additionally, stakeholders called for the re-negotiation of old Double Taxation Agreements (DTAs) to align them with current business realities while ensuring Kenya's interests are adequately represented.

What is pension?

In other related news, TUKO.co.ke collected and analysed the pension withdrawal rules in Kenya to help you determine when and how you can access pension funds.

In Kenya, pensions are managed by the Pension Act, of the laws of Kenya that came into effect on January 1, 1946 and the law has been amended regularly to comply with the prevalent times.

The rules regulating pension withdrawals depend on the pension scheme you contribute to in Kenya.