Proposed law to end pension delays and unlock savings for early exits

Civil servants who leave service before reaching the mandatory retirement age could soon enjoy full and immediate access to their pension savings if a new Bill before Parliament becomes law.

The Public Service Superannuation Scheme (Amendment) Bill, 2025, sponsored by Majority Leader Kimani Ichung’wah, seeks to overhaul the existing pension system, which has long been faulted for delays and restrictions that lock out employees from their own benefits.

The proposed law targets to amend the Pension Service Superannuation Scheme Act (Cap 189A) to eliminate barriers that force public servants to wait years before accessing their funds.

Currently, benefits derived from government contributions only become fully available after 10 years of service. Employees may withdraw 50 per cent after five years, with the entitlement rising by 10 per cent each year to a maximum of 120 per cent after a decade.

Exceptions only apply in cases of death, where dependents receive the benefits immediately.

This has left thousands of civil servants, including teachers and police officers, in long queues at the Treasury’s pension department, waiting for payouts.

Younger officers who quit or switch careers before 50 years of age have particularly struggled, as the law locks out access to both individual and government contributions.

“All retirement savings shall immediately vest in a member,” the Bill states, signalling a complete departure from the current system. If adopted, every contribution made by the government would belong to the employee once remitted, removing the waiting periods that have disadvantaged many.

Under the proposed framework, a public servant who resigns or moves to the private sector would have two choices, either withdraw the accrued savings in a lump sum or transfer the full balance to another registered pension scheme.

“A member may access accrued retirement savings on leaving employment before retirement in accordance with the Retirement Benefits Act,” the Bill reads.

The government has itself admitted in its scheme reports that the current structure is unfair, citing lack of portability of benefits, absence of investment income, no provision for voluntary contributions and delays that have caused endless queues at pension offices.

To fix the administrative hurdles, the Bill introduces tougher obligations for employers such as the Teachers Service Commission, the National Police Service and the Public Service Commission.

They will be required to deduct and remit contributions to the scheme’s custodian “not later than ten working days after the end of the month.” Failure to comply would attract a penalty equivalent to the scheme’s previous year’s rate of return.

“The Bill proposes to streamline governance and administration of the scheme (Public Superannuation Scheme),” Ichung’wah notes in the memorandum, underscoring the drive to secure member savings.

The reforms also seek to restructure the scheme’s board of trustees to ensure wider representation. Unions such as the Kenya National Union of Teachers and the Union of Kenya Civil Servants would nominate members to sit on the board, making the fund more inclusive and accountable.

Additionally, the proposed law mandates that schemes hold annual general meetings for members six months before the close of a financial year. For payouts, employees would not only have the option of a lump sum but could also opt for structured withdrawals, creating more flexibility in how retirement funds are accessed and used.

If passed, the Bill could mark a turning point in Kenya’s public sector pension management, unlocking funds earlier, ensuring accountability in remittances and strengthening governance of the multi-billion-shilling scheme.