TSC Provident Fund: All You Need to Know.
The Teachers Service Commission (TSC) Provident Fund is a scheme established to provide retirement benefits to teachers in Kenya who are employed by the Teachers Service Commission.
The fund is administered by the TSC and is governed by the Retirement Benefits Act (1997) and the Retirement Benefits (Occupational Retirement Benefits Schemes) Regulations (2000).
The TSC Provident Fund is a defined contribution scheme, which means that the benefits are determined by the contributions made by the employee and the employer, as well as the investment returns earned on those contributions.
Both the employer (TSC) and the employee contribute a fixed percentage of the employee’s salary to the fund, with the employer contributing more than the employee.
When a teacher leaves employment, they are entitled to a lump sum payment from the Provident Fund, which is equal to their total contributions plus any investment returns earned on those contributions.
The teacher can also choose to defer payment and leave their money in the fund to earn more investment returns until they are ready to receive the lump sum.
In the event of the teacher’s death, their dependants are entitled to receive a lump sum payment from the Provident Fund, which is equal to the teacher’s total contributions plus any investment returns earned on those contributions.
The amount paid out to the dependants is determined by the teacher’s nominated beneficiaries.
The TSC Provident Fund is invested in a diversified portfolio of assets such as equities, fixed income securities, and real estate. The fund’s investment strategy is aimed at achieving long-term growth while managing risks to ensure the safety of the members’ retirement savings.
How to Check TSC Provident Fund Contribution and Balance
Teachers and civil servants are now required to make contributions to their pension through the provident fund, according to the Teachers Service Commission (TSC).
To check their contribution and balance, as well as update beneficiaries, teachers can dial *378# and verify their account by entering their ID number and creating a password.
This change follows the enactment of the Public Service Superannuation Scheme (PSSS) Act in 2012, which established a defined contribution pension plan where both employees and employers contribute to benefit the employees.
Prior to this, the government operated a non-contributory scheme, also known as a “free pension,” that was fully financed by the government since independence. The PSSS is regulated by the Retirement Benefits Authority (RBA).
Purpose and Benefits of TSC Provident Fund:
The TSC Provident Fund was established to provide a retirement benefit scheme for teachers in Kenya.
The purpose of the fund is to provide financial security to the members when they retire from teaching service. The benefits of the TSC Provident Fund are as follows:
– Retirement Benefits: The TSC Provident Fund provides a lump sum payment to the members when they retire from teaching service. This payment is intended to provide financial security to the members during their retirement years. An officer who exits the service through resignation or dismissal does not lose on pension.
– Death Benefits: The TSC Provident Fund also provides a death benefit to the dependents of the members in the event of the member’s death. This benefit is intended to provide financial support to the dependents during their time of need.
– Loan Facilities: The TSC Provident Fund provides loan facilities to its members. Members can take a loan against their contributions to the fund. The loan can be repaid in installments over a period of time.
– Portability: The TSC Provident Fund is portable, which means that the members can transfer their contributions to another scheme if they leave the teaching service.
– Investment Returns: The TSC Provident Fund invests the contributions made by its members in a diversified portfolio of investments. The investment returns are then distributed to the members in the form of dividends.
– Tax benefits – Members enjoy a tax benefit of up to ksh 20,000 or 30% of pensionable emoluments, as pension contributions are deducted from the basic salary before tax is calculated.
– Portability – The accrued pension can be transferred to another pension scheme of one’s choice upon exit.
– Early Access to Retirement Benefits – Members of the scheme may access retirement benefits earlier than the prescribed retirement age due to various reasons like dismissal, resignation, ill health, mortgage finance, advance to buy a residential house, immigration, or death.
Drawbacks of the Non-contributory scheme (Free pension)
– The Non-contributory scheme (Free pension) puts employees who may wish to leave service before they reach 50 years at a disadvantage since they are not eligible for any pension or other benefits.
– If a member secures a job in another organization with a pension scheme, benefits under the Non-contributory scheme (Free pension) cannot be transferred to another pension scheme.
– Members of the Non-contributory scheme (Free pension) are not allowed to make additional voluntary contributions to the scheme.
– The accumulated pension cannot be accessed while in service until the time of exit.
– The Non-contributory scheme (Free pension) is discriminatory towards male officers with regard to marriage gratuity and widowers’ pension.
Membership Criteria for the Defined Contributory Scheme
– Permanent and pensionable employees who are below the age of 45 as of January 1, 2021, and are currently serving in the public service.
– Newly recruited employees who join the public service on or after January 1, 2021.
Employees who were 45 years and above as of January 1, 2021, had the option to join the scheme or not. Those who chose not to join remain in the previous non-contributory pension scheme.
Contribution Rates for the Defined Contributory Scheme
Under the new Defined Contributory Scheme, employees will contribute to the scheme based on a graduated rate of their basic salary.
The contribution rate will be 2% in the first year (from January 1, 2021), 5% in the second year (from January 1, 2022), and 7.5% in the third year (from January 1, 2023).
The employer will contribute 15% of the employee’s basic salary. Unlike the previous non-contributory pension scheme, under the new scheme, the contributions made by both employees and employers will be invested to earn investment income and managed by the board of trustees.
Male employees who join the new scheme will no longer contribute to the Widows and Children’s Pension Scheme (WCPS) and NSSF from the date of joining the scheme.
TSC Provident Fund: All You Need to Know.
