Former Kenya Railways staff reeling in poverty as pension scheme struggles

Thousands of former Kenya Railways Corporation staff are reeling in poverty many years after retirement as their pension scheme struggles against management headwinds a decade after its formation.

The scheme with an asset value of more than Sh30 billion continues to give meagre yields to the retirees who now feel cheated given the nature of prime assets they were given in 2006.

Historical outright theft, asset mismanagement, corruption and wrangles among the more than 8,000 pensioners has left the scheme limping in financial woes, only able to give peanuts to the retirees who are quickly dying out.

Tales of dejected families, hopelessness and bitterness are rampant among the retirees who will meet next month at an Annual General Meeting which has been delayed by over a year.

Even efforts to hire professional firms to help boost prospects of the asset-rich scheme has not yielded much as pension earnings remain low and irregular while the scheme struggles even to earn from its prime property located in the capital city.

Most of the property given to the scheme have been grabbed, disposed at a throw away price or ended up in lengthy and expensive court battles further deeming prospects of any yields for the old men and women.

Trouble started when a broke Kenya Railways Corporation gave assets including land and buildings to the pensioners after the giant government employer went under followed by a restructuring.

ASSIST RETIREES

Land and buildings located in the Nairobi’s Muthurwa, Kilimani, Landmawe, Nairobi West, Makongeni, Upper Hill, Ngara, Ngong Road, Hurlingham and the main railways terminal were given to the scheme to help assist the retirees in their sunset years.

A report done by Retirement Benefits Authority staff as early as 2010 found wanton mismanagement of the scheme assets as pensioners went for months without pay. Most of the land had no title, exposing them to invasion by cartels.

“The illiquid assets, mainly land and buildings transferred to the pension by the sponsor had serious encumbrances such as absence of title deeds. There have been series of complaints reported to the Authority and even the Ministry of Finance from the pensioners related majorly to non-payment of pension, misappropriation of scheme assets, abuse of office and other governance gaps,” RBA wrote in 2010.

The scheme, which could not afford to pay retirees, was found to be running on high expenses with no budget approvals from the board of trustees. Curiously, the scheme had no estate manager but hired two fund managers, Stanbic Investment Management Services and Co-Op Trust Investment Services gobbling Sh1 million every month.

“There is no good reason why a scheme with more than 99 per cent of its assets invested in property should appoint two fund managers and not a property manager,” RBA wrote.

HOUSEHOLD PHENOMENON

Theft did not stop there. The scheme was also spending Sh19 million yearly to cover for bank charges to process the pension, years after mobile money became a common household phenomenon in Kenya.

In addition, members of the board of trustees were earning Sh10,000 in sitting allowances.

The trustees sat as many times as 20 in a year to further deplete the meagre Sh30 million rental income from Muthurwa, Makongeni, Ngara, Upper Hill, Kilimani, and the Railways headquarter against the actual bill of Sh48 million then. Pensioners continued to die in poverty as their prime city assets swell in value.

The scheme was also paying the chairperson some Sh40,000 per month, an office with staff at Sh90,000 per month and had given petty cash in excess of Sh1.2 million in two years according to a 2011 RBA report.

“We are also informed that the scheme paid monthly fee of approximately Sh320,000 for a car hire for the chairperson. All these activities amount to unauthorised profits and conflict of interest both being a breach of trust,” RBA wrote in the report that called for the removal of the trustees and stoppage of various property deals that had been initiated.

In the shady deals, buyers were handpicked without any advertisements being made as some failed to complete payments for the property sold without title deeds.

SIGNATURE FORGED

In one lease arrangement for the railway good shade worth Sh100 million, the client (JIPE Close Ltd) who had paid Sh39 million later denied having entered into any agreement, even alleging his signature was forged in the deal.

Another sale of a plot along Ngong road saw the buyer deposit Sh10 million three months before the property was advertised. Other offers were later ignored including that of Sh120 million leaving the “preferred buyer” to acquire the property at just Sh60 million.

The scheme then hired Corporate and Pension Trust Services limited, a wholly owned subsidiary of the Alexander Forbes Financial services in July 2012 as a corporate trustee to help them save the situation.

The pensioners say although significant changes have occurred in the way they were remunerated before, the yields still trickle in small bits as much as their property continue to appreciate while going to waste.

Houses in Makongeni and Muthurwa are occupied at either very little rent or free. Muthurwa residents have now lived in the houses for close to seven years without paying anything. A court order issued in December 2015 to evict them by April last year did little to move them.

The new trustee told the Nation that numerous court cases had hampered efforts to translate the asset wealth to the lives of pensioners some who earn as little as Sh3,000.

ACCRUED FEES

The trustee's managing director Anthony Kilavi told the Nation that even his firm was owed Sh50.9 million by the scheme in fees accrued for the last two and a half years since it remained broke. He also blamed negative publicity to the slow uptake of the prime property owned by the scheme.

“Unbeknown to many people, improvement and ultimate recovery of the KRSRBS scheme is a delicate and sensitive process and it requires the support and understanding from all stakeholders. Regrettably the pursuit of this objective has been complicated and some cases impeded by unnecessary and frivolous court injunctions which delay the corporate trustee from successfully initiating actions of improving the scheme. The recovery process is long and hard with lots of sacrifice along the way. Patience is required as the corporate trustee is working on a recovery strategy,” Mr Kilavi wrote in an e-mail response.

Mr John Kamathi, a pensioner based in Murang’a who earns Sh3,000 every month, however believes the Trustee has not done enough to convert the billions in assets to better lives. The 75-year-old said his life is worth less than a corpse.

'SOCIAL PROTECTION'

“We are poorer than the old men depending on the social protection funds, even the dead in the mortuary are preserved at Sh600 per day while I earn Sh100 per day. Only the sponsor and the service providers are benefiting because if the assets are well managed, with even only 10 per cent put into production, we cannot live like this. We need them to be committed otherwise we will all be dead by the time they sell those assets, then who will benefit?” Mr Kamathi paused.

Mr Kilavi, however, laughed off claims by pensioners that they earn too little to sustain themselves and instead blamed them for “marrying second wives and starting new families after retirement instead of moving to the rural areas”.

But even those who are in the rural areas who spoke to the Nation expressed bitterness that they were “poor millionaires” as members of one of the richest schemes.

Mr James Henry Owang’, who chairs the western chapter of the retirees, said various tricks are still being used to steal from the retirees including lengthy court cases that emerge whenever a property is to be disposed.

DIVIDE MEMBERS

He said insider arrangements have been made to divide the members along various factions and avoid a uniform stance that can see them demand accountability for their multi-billion shilling retirement wealth.

Several heads of the various pensioners associations are said to be in the pockets of the service providers and the board of trustees with some of them collecting rent and parking fees in several properties around the city.

Insiders also point fingers at some of their representatives who earn a cut each time a property is disposed to avoid whistle blowing any wrong doing or mismanagement of the pensioners’ wealth.

The scheme, whose total monthly pension bill now stands at Sh73.3 million has a total debt of Sh1 billion while the audited financial statements as at June 2016 (to be presented next week) reflect the assets of the scheme at Sh30.8 billion.

The corporate trustee says the scheme has realised gains in regularising monthly pension, increasing rental income and clearing pension arrears with Sh200 million expected to be settled in two weeks.

THREE-BEDROMMED BUNGALOWS

Insiders however contend that the scheme, which now collects Sh48 million per month in rent, is capable of collecting up to Sh118 million per month despite some rentals remaining as low as Sh2,000 and 25,000 for three-bedroomed bungalows in Nairobi West and Ngara. They wonder how in the new constitutional dispensation, tenants can chose to stay in a house without paying rent while those they pay to deal with them watch helplessly.

Questionable disposal of property also continues to haunt the new trustee with a property worth Sh1.7 billion in Upper Hill sold in 2014 and the payment continues to drag more than two years later.

“We have received Sh989 million of the sales proceeds from Matumbato. There was delay in completion of the sale due to the need for us as a pre-condition of the sale to first transfer the title of the property from KRC to the Scheme, renew the lease period at the NLC and Ministry of Lands among other processes,” Mr Kilavi wrote.

RBA Chief Executive Edward Odundo said the scheme was facing challenges in converting the assets to cash while the members continued to be divided, further complicating the challenges.