Counties risk penalties over Sh91.2 billion unpaid pension deductions
Despite the Treasury forming a task force last year to address the growing pension arrears, the debt continues to rise.
The Parliamentary Budget Office (PBO) is calling for penalties against counties that deduct pension contributions from workers but fail to remit them.
As of October 2024, unremitted pension funds had reached Sh91.2 billion, raising concerns about the financial security of county employees upon retirement.
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Despite the Treasury forming a task force last year to address the growing pension arrears, the debt continues to rise.
The PBO, in its latest report on the 2025 Budget Policy Statement (BPS), warns that many county workers could retire without pensions, leaving them dependent on the government's limited social security system.
“Besides the recommendation in the BPS of having the county enhance record keeping of the arrears and prioritisation of their payment, the government can employ some form of sanctions over counties that continue to delay these remittances,” the PBO states.
However, the report does not outline specific penalties, leaving it up to senators to determine possible actions against counties accumulating pension debts.
According to the PBO, the unremitted pension funds include Sh45.7 billion owed to the Local Authorities Provident Fund-DC, Sh39.5 billion to the Local Authorities Pension Trust-DB, and Sh5.9 billion to the County Pension Fund-DC.
Counties have struggled with pension remittances for years. The debt recorded in October 2024 was a Sh17.8 billion increase from Sh73.4 billion in August 2023.
The PBO describes this 24.5 per cent rise in just 14 months as alarming, cautioning that it could leave many workers without retirement benefits.
“The risk would be having retirees leaning on social security from the government to stay afloat, which calls for the diversion of resources from the economy’s productive sector,” the report adds.
The Treasury had previously indicated in the 2024 Budget Review and Outlook Paper that it was setting up a team to verify counties’ unremitted pension deductions.
However, the growing debt signals that the issue remains unresolved.
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