Why unremitted pension contributions have hit Sh65 billion

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Players in the pension sector have backed the amendment of the law to mandate the Kenya Revenue Authority (KRA) to collect unremitted contributions that have ballooned to Sh65 billion.

Kenya Retirement Authority (RBA) CEO Charles Machira said once Section 53(b) of the retirement benefits is amended, KRA would be an agent to collect the unremitted contributions.  

“Non-remittance of pension is on a level of concern. It is largely in the public sector; as of March, it was Sh72.2 billion, which reduced to Sh65 billion. Most of the money is held by the county governments, universities and sugar companies,” said Machira during the 12th Zamara Annual Pension Convention 2025 in Mombasa.

Public universities, county governments and sugar companies are among the biggest defaulters. 

Machira said under the new reforms, the officers who fail to remit employees' savings would be held accountable and subjected to disciplinary action.

He said the umbrella retirement benefit scheme regulations would be amended to limit the permitted asset classes of investments to readily tradable assets only.

He stated that they have proposed allowing contractual employees to participate in the schemes.

Machira said the public sector pension schemes account for 98 per cent of the unremitted amount, which has been on a steady rise since 2020.

He noted the low pension coverage, with 73.5 per cent of Kenyans within the working-age population lacking any form of pension access, thus exposing them to old-age poverty.

The CEO said the fund value grew to Sh2.53 billion as of June, an increase from 2.24 recorded in June, 2024.

He said the authority has introduced income drawdowns as an alternative to annuities and medical funds to cushion retirees from the high cost of health care.

Chairperson of the National Assembly Finance and National Planning Committee Kuria Kimani said trust deficit has slowed the number of people looking to save in pension schemes.

Zamara Group Executive Director James Olubayo urged NSSF to look at umbrella schemes and individual pension plans for both private and public schemes.

 Kuria said that although the retirement benefits sector today commands an asset base of over Sh2.4 trillion, only 20 per cent are saving, with most being in the formal sector.

 “Let us make saving as natural as spending. We must reimagine pensions not as a privilege for the employed but as a right for every Kenyan worker. The boda rider, mama mboga and digital content creator all deserve a dignified retirement. This reform is compassion codified into law,” said Kimani.

He said that in December 2024, Parliament passed the Tax Laws (Amendment) Act 2024, which saw increased tax-free pension contributions from sh240,000 to sh360,000 annually as an investment in hope.

Kimani said the tax relief for post-retirement medical funds, which went up to sh15,000 per month, is now deductible, making health security the twin brother of financial security.

He said the act saw full tax exemption on pension benefits for members retiring under scheme rules, due to ill health, or with 20 years of contribution.

Kimani urged the pension stakeholders to use digital ID, mobile wallets, tokenised savings platforms, and fintech APIs to bridge the gap.

Kuria said that Parliament will continue to create a legal framework that strengthens the pension sector, deepens capital markets, and protects savers from exploitation.

“We will strengthen the sector’s robust legal frameworks for retirement benefits, deepen capital markets, enhance investment opportunities and growth and also protect savers’ safeguards against exploitation and fraud,” said Kimani.

Zamara Group Executive Director James Olubayo urged NSSF to look at umbrella schemes and individual pension plans for both private and public schemes.