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State fails to remit Sh1.2bn to civil servants’ pension
Players in the pensions industry have raised alarm against the non-remittance of deductions highlighting the impact to not just savers but also the execution of State projects.
The government has failed to remit deductions of Sh1.2 billion to the civil servants’ pension scheme, risking a loss of returns to workers in Kenya's troubled retirement benefits system.
According to the Office of the Auditor General, the Public Service Superannuation Fund (PSSF) had a balance of Sh10.6 billion at the end of June 2025 relating to unremitted employer and employee contributions due to the fund.
The State had paid up arrears of Sh9.38 billion at the end of August, leaving a balance of Sh1.2 billion which remained during the audit of PSSF books.
Delays in remitting the deductions means the funds have less time to earn returns for retirees, hurting their benefits.
Read: State fails to remit Sh220m pension for new employees
The unremitted pension contributions add to the concerns on Kenya’s weakening pension ecosystem including the erosion of public confidence in the safety of retirement contributions.
“This is contrary to Section 8(c) of the Public Service Superannuation Scheme Act, 2012 which states that, not later than ten working days after the end of the month in which the contributions are due, the government shall remit an amount comprising the member’s and the government’s contribution to the custodian,” the Auditor General said.
“Unless the outstanding balance is paid together with the penalty provided for, contributors stand to lose returns that would have been earned had the contributions been received in time.”
The government has persistently delayed remittances of pension contributions to the civil servants’ scheme and has previously carried arrears to the fund.
In the financial year ending in June 2023, the government failed to remit Sh219.9 million to PSSF, revealing risks for the defined contribution pension scheme established in 2021 to cover workers including teachers, police and employees of the National Youth Service (NYS).
In the year to June 2024, the government failed to remit deductions totalling Sh3.2 billion but settled the arrears in September of the same year.
Players in the pensions industry have raised alarm against the non-remittance of deductions highlighting the impact to not just savers but also the execution of State projects.
“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,” Enwealth Financial Services Limited Managing Director Simon Wafubwa said.
“The silent capital drain ripples through the economy: fewer pension inflows mean lower domestic savings and greater dependence on short-term borrowing.”
The widespread non-remittance of pension deduction has seen the industry regulator-the Retirement Benefits Authority (RBA) push for changes to rein in the chief executive officers (CEOs) and accounting officers of State agencies who collect but fail to remit statutory deductions.
The regulator plans to enlist the help of the Kenya Revenue Authority (KRA) in its quest to collect total unremitted pension deductions which reached Sh72 billion as of June 2025.
RBA has attributed the surge in unremitted pension contributions to ‘indiscipline’ in the public sector, where funds allocated for salaries and wages are reallocated for other purposes.
“We are in the process of amending the law so that all employers, whatsoever, including CEOs, who do not remit those contributions will be held accountable and to be punished from day one. We have also amended the law to empower KRA to collect any unremitted contributions with the necessary penalties on behalf of RBA and that has happened,” RBA Chief Executive Officer Charles Machira said in a previous interview.
The pension industry’s assets under management grew by 12.2 percent in six months to June 2025, reaching Sh2.53 trillion from Sh2.2 trillion in December 2024.
PSSF’s fund value rose from Sh142 billion in June 2024 to Sh242 billion in June 2025 supported by fresh contributions estimated at Sh4.5 billion each month and higher investment income.
