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Sh56.6bn pension shortfall threatens workers’ lives on retirement
Unremitted pension rose by Sh13.54 billion or 28.7 percent 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, according to RBA data.
Thousands of workers nearing retirement risk delays in accessing their benefits after persistent employer defaults on contributions plunged 27 pension schemes into a Sh56.5 billion deficit.
Latest Retirement Benefits Authority (RBA) data up to March 2025 shows the funding level—the ratio of a pension schemes’ assets (money and investments held) compared to their liabilities (benefits they have promised to pay members in future)— has fallen below the required minimum of 100 percent in half of the 53 registered defined benefit schemes.
A defined benefit scheme is a type of occupational pension plan where the retirement benefits are pre-determined according to the scheme’s rules, with the employer promising to pay pension based on factors such as an employee’s final salary, duration of service and a set accrual rate.
Disclosures in the recently published financial sector stability report co-authored by financial sector regulators including RBA, shows the Sh56.5 billion shortfall in the 27 schemes is largely attributable to defaults by employers in both public and private entities.
Many employers have failed to remit employees’ deductions with their matching contributions to pension schemes.
“Twenty-seven schemes reported a funding level which was below the required minimum funding level of DB schemes of one hundred percent (100 percent) and total actuarial deficit of Sh56.5 billion,” says the report.
The Sh56.5 billion shortfall places the burden on employers sponsoring the schemes to top up the amount to ensure retiring members enjoy their benefits. RBA has been intensifying compliance measures to recover unpaid contributions and compelling employers sponsoring such schemes to submit funding plans to address the shortfall.
The breach in funding level in the 27 schemes has pulled down the industry average funding level for all the 53 registered defined benefit schemes to 102 percent as at March 2025 even as defaults in contributions continue to pile up.
Unremitted pension rose by Sh13.54 billion or 28.7 percent 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, according to RBA data.
The latest figure of unremitted pension means that in just 12 months, the amount has surged by Sh24.84 billion or 52.6 percent, worsening the situation for the schemes and the contributing employees.
Entities including public universities and county governments account for 98 percent or Sh70.56 billion of the non-remittances leaving four percent to the private sector.
Without these contributions, schemes lose both immediate cash flow and long-term investment income, making it difficult to meet pension promises.
As non-remittances pile and funding gaps hit schemes, members of schemes are heading to retirement with fear of delayed payments or reduced pensions, as schemes lose out on investment returns from funds still withheld by employers.
Late remittance of pension deductions is penalised in Kenya at the rate of Sh20,000 or five percent of the outstanding amount every month, whichever is higher. The persisting rise in non-remittances means that the fine has failed to deter the vice or the entities involved are cash-strapped.
