Mbadi blasts counties over Sh40bn pension arrears, calls non-remittance ‘theft’

County governments’ failure to remit pension contributions has piled up over Sh40 billion in debt, risking the collapse of public workers’ retirement funds, Treasury Cabinet Secretary John Mbadi has warned.

Mbadi decried the persistent non-remittance of pension dues by counties, terming it a significant challenge to the viability of public pension systems.

“A major challenge facing public pension schemes is the consistent non-remittance of contributions by county governments. This has ballooned into a substantial debt burden, undermining investment decisions and ultimately reducing returns for members,” he said during the 14th Annual General Meeting of the Local Authorities Provident Fund (LAPFUND).

Outstanding arrears

Mbadi noted that he had formed a task force earlier in the year to audit the outstanding arrears, propose solutions for long-standing debts, and recommend comprehensive reforms. He pledged full support in enacting the team’s proposals.

“There’s no justification for deducting employees’ salaries and withholding those funds. That is theft, plain and simple. Such actions are illegal, criminal, and must be punished,” he said.

Mbadi also called for legal safeguards to prevent governors from arbitrarily shifting county workers from one pension fund to another with each election cycle.

“We must establish legal deterrents to stop the recurring practice of governors shifting employees from one pension fund to another. Once enrolled, the decision to switch should rest with the individual, not the administration. It’s unfair and must be stopped,” he said.

The CS’s remarks came in response to concerns raised by the County Government Workers Union Secretary General, Roba Duba, who disclosed that counties had accumulated pension arrears for over two decades, making it nearly impossible for LAPFUND to invest effectively.

“My attempts to resolve this issue have been frustrating. I hope the new Treasury CS will tackle it head-on,” Duba said.

In response, Mbadi scheduled a follow-up meeting with Duba to iron out the issues and affirmed the importance of the pension sector in driving national economic development.

The pension industry in Kenya, he noted, manages over Sh2.3 trillion in assets.

Risky ventures

While urging schemes to explore investment opportunities beyond conventional instruments, he cautioned against risky ventures that could jeopardise members’ savings.

“I do not want to see schemes collapsing due to reckless investments. Growth and inclusion are essential, but safeguarding members’ funds is paramount,” Mbadi said.

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• Treasury Cabinet Secretary John Mbadi
• Roba Duba
• county governments
• public workers
• retirement funds
• pension non-remittance
• County Government Workers Union
• Mbadi blasts counties over Sh40bn pension arrears
• calls non-remittance ‘theft’

He urged pension schemes to embrace public-private partnerships, particularly in infrastructure, as a way to stimulate economic growth while ensuring higher returns for contributors.

Kisumu Deputy Governor Mathew Owili backed the concerns, pledging to defend the autonomy of county staff in making pension choices.

“If I become governor in 2027, I’ll ensure that Kisumu staff contributing to LAPFUND retain the right to choose their pension fund. That decision should not lie with any Governor,” he said.

In a speech delivered on his behalf by Dr Owili, Governor Anyang' Nyong’o encouraged LAPFUND to align its investment strategy with county development goals, including sustainability and tourism.

“In line with our sustainability goals, we urge investments in renewable energy, sustainable agriculture, and eco-tourism. Strategic investments within counties not only grow member wealth but uplift the communities they serve,” Nyong’o said.

He also urged county staff to begin planning their retirement early and to take a proactive interest in understanding how their pension schemes operate.