In January of 2011, the City Council borrowed KES 13.1 billion from the Local Authorities Pension Trust Fund (Laptrust) among other public pension schemes. It has since been unable to settle its debts. What does this mean for pension plan holders on the brink of retirement? What then happens when the government is unable to cover its costs? Do the pension fund holders lose their money?
It is for this exact reason that retirement schemes are protected by a system which ensures the safety of the fund. This system is composed of a custodian who guarantees the safety of the fund and a Fund Manager who invests the money on the holder’s behalf.
So when the government is unable to pay its debts, the Fund Manager is backed by a set of Retirement Benefits Authority (RBA) guidelines which will ensure that debts are settled through other means.
According to Laptrust MD Hosea Kili, the Council has already paid back KES 2.3 billion. He said that the Council would cover the remaining KES 10.8 billon by relinquishing seven of its properties to Laptrust and making contributions to the fund through a bank standing order. The pension trust company, which is licensed as a retirement scheme administrator by the RBA, will use the properties to settle the remaining debts.