Kenyan retirees promise of a dignified retirement has too often ended in frustration years after leaving formal employment, some discover that the pension contributions deducted faithfully from their payslips were never remitted to their retirement schemes.
The delays, and in some cases complete failure, to release retirement funds have become a long-running source of anxiety among the people who have helped grow thhe economy, eroding trust in the country’s pension system.
That frustration is now driving a major policy shift with the government considering changes that would bring the Kenya Revenue Authority (KRA) into the heart of pension collection, making the taxman a mandatory agent in ensuring retirement contributions are properly and timely remitted to safeguard the funds of the old men and women.
If amendments to Section 53B of the Retirement Benefits Authority Act are approved, KRA would collect pension contributions on behalf of retirement schemes, a move regulators believe could significantly reduce defaults and speed up access to benefits for retirees.
Speaking during a briefing with the Financial Journalists Society of Kenya (FJSK), the Retirement Benefits Authority (RBA) said the proposal is meant to close loopholes that have allowed employers to deduct retirement contributions from workers’ pay, but fail to pass the money on to the Funds.
While the authority welcomed KRA’s potential involvement, it also struck a sobering note when it said that about 74 per cent of Kenyans remain unprepared for retirement, underscoring deeper structural weaknesses in savings culture, income security and compliance in Kenya.
“Only 26 per cent of Kenya are ready for retirement,” said RBA, adding that 41 per cent of those who had retired admitted in a research by the authority that the pension they received was not enough. However, 55 per cent of those interviewed agreed that low montlhy contributions lead to lower pensions.
The policy push comes as RBA intensifies efforts to recover more than Sh72 billion in unpaid pension contributions. The authority has rolled out tougher penalties and enforcement measures targeting institutions that have deducted retirement savings from employees but failed to remit them to pension schemes.
The scale of the problem is stark as the latest RBA data shows that unremitted pension deductions — money already taken from workers but not forwarded to retirement funds — have climbed to about Sh64 billion. The persistent non-compliance has shaken confidence in Kenya’s retirement benefits system and left millions of contributors exposed.
Nearly all of the outstanding amounts, about 98 per cent, are linked to county governments, struggling public universities, sugar factories and other quasi-government institutions. Many of these entities face chronic cash-flow problems, but regulators argue that financial distress cannot justify diverting workers’ retirement savings.
To address the crisis, that is why RBA seeks to significantly expand its enforcement powers. One key proposal is the reinstatement of the statutory clearance mechanism, which would block non-compliant employers from accessing government disbursements or statutory funds unless they can prove they are fully up to date with pension remittances.
The authority also wants powers to directly recover outstanding contributions, including the ability to issue garnishee orders that would attach the bank accounts of defaulting institutions. In a further escalation, accounting officers could be held personally responsible for persistent defaults, facing stiffer penalties and higher interest charges than the routine fines currently in place.
For retirees and workers nearing the end of their careers, these changes represent more than regulatory tightening. They signal an attempt to restore credibility to a system that, for many, has failed at its most critical moment — when work ends and retirement begins.
