Counties owe Sh40 billion in pension arrears, Mbadi vows action

Treasury Cabinet Secretary John Mbadi has raised alarm over county governments failing to remit pension contributions, causing a debt of more than Sh40 billion that threatens the stability of public workers’ retirement funds.

Speaking at the 14th Annual General Meeting of the Local Authorities Provident Fund (LAPFUND), Mbadi called the non-remittance of employees’ pension dues "theft" and stressed that such illegal acts must be punished.

Mbadi explained that the consistent failure by counties to pay pension contributions has created a large debt burden that undermines investment decisions and lowers returns for members.

He revealed that earlier this year he formed a task force to audit these arrears, find solutions for the longstanding debts, and recommend reforms.

"There’s no justification for deducting employees’ salaries and withholding those funds. That is theft, plain and simple. Such actions are illegal, criminal, and must be punished," Mbadi said.

The Treasury CS also criticized governors who shift county workers from one pension fund to another during election cycles.

He called for legal measures to stop this practice, saying, "Once enrolled, the decision to switch should rest with the individual, not the administration. It’s unfair and must be stopped."

Mbadi’s remarks followed concerns raised by County Government Workers Union Secretary General Roba Duba, who said counties have accumulated pension arrears for over 20 years, hampering LAPFUND’s ability to invest effectively.

"My attempts to resolve this issue have been frustrating. I hope the new Treasury CS will tackle it head-on," Duba said.

Mbadi responded by scheduling a follow-up meeting with Duba to address the issue and emphasized the importance of the pension sector in Kenya’s economic growth.

The pension industry in Kenya manages assets worth over Sh2.3 trillion.

Mbadi urged pension schemes to seek new investment opportunities, especially public-private partnerships in infrastructure, to boost economic growth while protecting members’ savings.

"I do not want to see schemes collapsing due to reckless investments. Growth and inclusion are essential, but safeguarding members’ funds is paramount," he added.

Kisumu Deputy Governor Mathew Owili supported these concerns and promised to defend the county staff’s right to choose their pension fund.

"If I become governor in 2027, I’ll ensure that Kisumu staff contributing to LAPFUND retain the right to choose their pension fund. That decision should not lie with any Governor," he said.

On behalf of Governor Anyang’ Nyong’o, Dr. Owili urged LAPFUND to align its investments with county development goals such as sustainability and tourism.

"In line with our sustainability goals, we urge investments in renewable energy, sustainable agriculture, and eco-tourism. Strategic investments within counties not only grow member wealth but uplift the communities they serve," Nyong’o said.

The governor also encouraged county workers to plan their retirement early and take an active interest in understanding how their pension schemes operate.