CS Mbadi admits graft as senators probe fraud targeting retirees

The government is set to implement an automated pension system next month to curb graft and fraud in the disbursement of pension benefits, Treasury CS John Mbadi has announced.

This came amid alarming reports of a fraud syndicate targeting retirees who receive lumpsum pension payouts from the government.

The alleged fraudsters are said to be mysteriously accessing the bank details of retirees and siphoning off their pension funds.

Migori Senator Eddy Oketch brought the issue to light, revealing the criminals can obtain sensitive banking information, allowing them to monitor transactions and swiftly defraud beneficiaries once pension payouts are deposited into their accounts.

“I am seeking a statement from the Senate Finance and Budget Committee regarding a number of fraud cases involving Absa Bank accounts since 2022, as well as the status of investigations into those cases,” he said.

Oketch cited the recent case of a retired teacher, who lost her entire pension of Sh2.4 million, which had been deposited into her bank account.

Appearing before the Senate plenary on Wednesday, CS Mbadi acknowledged the existence of fraud involving rogue pension officers and banking staff.

“We have identified cases where pensioners have been defrauded due to collusion between pension staff and banking officials,” he told senators.

The CS said the upcoming automated pension system aims to eliminate opportunities for fraud and extortion by corrupt officials.

Mbadi also addressed growing concerns over delays in pension disbursements to retirees, which in some cases take months or even years.

“I agree there have been challenges. When pensioners leave employment, they often wait too long to receive their benefits, partly due to systemic inefficiencies. However, there are additional issues contributing to the delays,” he explained.

According to the CS, delays often stem from poor coordination within ministries and agencies, where pension files are either misplaced or slow to process.

“We have even had cases where corruption has played a role,” he said.

Mbadi, however, denied claims the government has been diverting pension funds for other uses.

“I am not aware of any instance where pension allocations have been re-allocated. In fact, pension funds are among the most securely ring-fenced allocations,” he affirmed.

Mbadi said the government has undertaken a comprehensive review of the pension administration process to identify and address bottlenecks that contribute to delays.” 

The ministry is upgrading the pension management information system (PMIS) to reduce manual interventions, improve efficiency and enhance data security.

“The Treasury has onboarded a contractor to develop an enterprise resource planning (ERP) solution, which will fully digitise pension administration,” he said.

The automated system will allow for online claim submission to eliminate paperwork delays, create self portal for pensioners to track their claims and reduce time for processing claims,” he said.

The system, which will be rolled out from July 1, will eliminate the manual system, which he said has been prone to abuse.

To address pension issues at the Teachers' Service Commission, the Treasury has deployed 18 pension officers to expedite the verification and submission of pension claims.

He said the government has also moved to enforce early submission polices.

The state agencies are mandated to submit claims nine months before an officer’s retirement date to allow sufficient time for processing.

“The government has initiated a review of pension laws to align them with emerging needs and improve the sustainability and efficiency of pension payments,” he said.

In addition, the government is developing the national retirement benefits policy.

Already, the Cabinet has approved the policy, which aims to harmonise retirement benefits, improve governance and enhance sector growth.

Further, the Treasury has enhanced public awareness and sensitisation programmes targeting civil servants on retirement documentation to minimise errors and delays in pension application.