Pension arrears soar to Sh57 billion as retirees struggle

The amount of unremitted pension contributions in Kenya has surged to Sh57 billion as of December 2024, rising from Sh47.16 billion in June. The growing backlog has left many retirees facing financial insecurity.

According to the Retirement Benefits Authority (RBA), public sector pension schemes account for 98 percent of the arrears.

RBA Chief Executive Officer Charles Machira warned that the actual figure could be even higher if investment income is considered.

“The Sh57 billion arrears is only the principal amount. If you add the investment income, which is a lot, then the unremitted contributions are more,” he said.

Employers failing to remit deducted pension contributions have caused financial distress for retirees.

Governance challenges within pension schemes have been highlighted as a key issue, with employer-appointed officials making up half of the board of trustees. This structure has made it difficult to enforce remittances without conflict.

“When this law was designed, it was not expected that employers would deduct and fail to remit. We put emphasis on trustees to ensure compliance but forgot the employer appoints most of the trustees, giving room to mischief,” Michira said.

To curb the problem, RBA is advocating for the Kenya Revenue Authority (KRA) to take over the collection of unremitted contributions.

If approved, KRA would have the power to issue agency notices against defaulting employers and enforce sanctions such as freezing bank accounts.

“The amendment aims to anchor the collection of unremitted contributions as part of the functions of KRA,” RBA stated.

The pension industry has also been struggling with low coverage, currently at 26 percent. If KRA is given the mandate, it would set deadlines for payments and impose penalties on defaulters.

Michira stressed the need for strict enforcement.

“Why you deduct and fail to remit is criminal. We need to delegate the agency powers to KRA. KRA has better enforcement powers, including accessing employer accounts,” he said.

KRA already enforces several laws beyond tax collection, such as those under the Traffic Act and the Betting Lotteries and Gaming Act. If assigned this role, it could improve pension collection efficiency.

Public universities and county governments have been flagged as major offenders in failing to remit pension deductions.

An RBA survey found that 57 percent of pensioners struggle with inadequate savings, highlighting the urgent need for reforms.

With arrears continuing to rise and governance issues persisting, there is growing pressure to implement measures that will secure retirees’ financial future.