When a county worker or university lecturer looks at their pay slip, they often see a deduction marked ‘pension contribution.’
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What many don’t realise is that, in far too many institutions, the money never reaches the retirement fund. It’s withheld, sometimes for years, by cash-strapped or poorly governed employers.
According to the latest Retirement Benefits Authority (RBA) data, unremitted pension rose by Sh13.54 billion in six months to close December last year at Sh60.7 billion and swelled further to Sh72 billion as at end of June this year. Nearly 98 percent of that amount lies with public and quasi-government institutions such as universities, parastatals, and county governments.
Yet the entire pension industry manages over Sh2.25 trillion in assets, making it one of the country’s largest institutional investors. This mismatch reveals a deep vulnerability in Kenya’s pension ecosystem.
Pension funds are the backbone of Kenya’s long-term investment base. They buy government bonds, finance infrastructure projects, and provide liquidity to real-estate and equity markets. When contributions fail to arrive, funds lose investable cash. Some are forced to liquidate assets prematurely or slow down new investments.
That silent capital drain ripples through the economy: fewer pension inflows mean lower domestic savings and greater dependence on short-term borrowing. As RBA noted in its 2024 statistical update, the sector’s growth slowed despite strong asset performance, partly because of irregular remittances.
Besides, every unpaid shilling erodes public confidence. Workers begin to doubt that their deductions are safe. Younger employees, particularly in the informal sector, interpret pension schemes as risky or unreliable and choose cash savings instead.
Kenya’s pension coverage remains just about 26 percent of the working population. Non-remittance scandals result in delayed payouts at retirement which further discourages enrolment from younger workers, especially among micro-enterprises and self-employed workers who already struggle with low financial literacy.
Even though the RBA Act requires employers to remit pension deductions within 15 days or pay penalties, such guardrails exist on paper, but enforcement has proved difficult. Many defaulting entities are public bodies shielded by bureaucracy or budget delays.
And governance structures compound the problem. In many schemes, half or more of the trustees are appointed by the employer. That conflict of interest makes it awkward to press the same employer for arrears.
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The regulator’s authority is further diluted when defaulters face no meaningful consequences beyond routine notices.
Eventually, when these organisations can’t settle arrears, the burden eventually shifts to the exchequer.
History shows that unpaid pension liabilities often resurface as Treasury bail-outs or court-ordered settlements. That means today’s non-remittance becomes tomorrow’s public debt. Left unchecked, widespread under-funding also increases old-age poverty, forcing government social-protection schemes to fill the gap-another fiscal pressure on taxpayers.
To restore confidence and stability in the pension system, Kenya needs tougher enforcement of remittance laws, stronger scheme governance, and greater transparency. The RBA should be empowered to attach accounts or issue agency notices against chronic defaulters, while pension boards must include a majority of independent or member-elected trustees to curb employer interference.
Real-time digital monitoring of deductions through platforms like eCitizen or iTax would also ensure automatic reconciliation, and an annual public list of non-compliant institutions would enhance accountability.
Above all, public bodies must be barred from diverting employee pension deductions to other uses and be held liable for breaches.
The growth of the retirement benefits sector is no small feat. But the sector’s strength is built on trust and trust depends on compliance.