Meaning Of Provident Fund
The Teachers Service Commission (TSC) has added a new deduction to teachers’ payslips in compliance with the Kenyan government.
Through the Provident Fund deduction, teachers will pay 2% of their monthly salaries into the new savings scheme.
“Provident fund” is another term for “pension fund” in literary context.
The deduction’s main goal is to provide employees with lump-sum compensation when they leave their jobs. With pension plans, which have both lump-sum and monthly pension payout components, this is different. Although both types of plans feature one lump sum payment at the conclusion of employment, gratuity and provident funds differ in certain ways. Provident funds function as defined contribution plans, whereas pension funds are defined benefit plans.
The new contributory pension plan will be funded by 7.5% of the basic monthly wages of government employees (including teachers), with a 15% employer contribution.
Teachers will only be required to contribute 2% of their base income in the first year in order to lessen their financial load (2023).
Teachers will begin contributing 5% of their base pay in 2023 (the third year), and the full 7.5% deduction will begin in 2024. (2023).
For the time being, men are exempt from the deduction required by the new pension plan because the Widows and Children’s Pension Scheme (WCPS) contributions have been stopped.
WHO WILL THE NEW PENSION SCHEME COVER?
All public sector workers hired through the following channels will be covered by the program:
- the Teachers Service Commission
- the National Police Service Commission
- the Public Service Commission, or
- any other service that the Cabinet Secretary determines to be a public service for the purposes of the Act.
The scheme will be mandatory for all employees aged below 45 years.