Workers face old age poverty as employers default pension

 Retirement Benefits Authority says unremitted contributions have increased to Sh84 billion in 2025 from Sh69 billion in 2024. [Courtesy]

Kenyan employers are increasingly failing to remit pension deductions made from employee pay, as unremitted pension contributions increased to Sh84.16 billion in 2025, driven by a double blow of private-sector financial distress and public-sector cash crunches.

Many firms are now in breach of both the retirement benefits and employment laws that require employers to remit deducted pay within 15 days and term withholding of wages as an illegality.

A new report from the Retirement Benefits Authority (RBA) reveals a deepening crisis in the sector, as private companies battling tough economic times and government entities crippled by budgetary constraints increasingly reallocate employee pension deductions to cover immediate operational costs.

In the report, RBA said unremitted contributions have increased to Sh84 billion in 2025 from Sh69 billion in 2024.

It noted that overdue contributions aged over 30 days have nearly tripled from Sh25.35 billion in 2021 to Sh73.14 billion in 2025. Occupational schemes, which are employer sponsored schemes, account for the vast majority of the long-overdue funds, standing at Sh63.76 billion.

This points to cashflow hardships among companies, which alongside government agencies are diverting the statutory employee pensions deductions to cover immediate operational expenses.

Public sector entities account for 93 per cent of all unremitted contributions, frequently diverting statutory employee pension deductions to cover operational expenses due to budgetary constraints at times occasioned by delayed exchequer releases.

“Unremitted contributions, especially contributions overdue by more than 30 days, accounted for most of this balance each year.

By 2025, these unremitted contributions reached Sh73.14 billion, nearly tripling from the 25.35 billion recorded in 2021,” said RBA in its Statistical Digest.

“Occupational Schemes accounted for the bulk of these contributions, totalling to Sh63.76 billion of the Sh73.14 billion total.”

In what could be a sad reality for employees, pension schemes are increasingly considering writing off some of these unremitted contributions. In their books, the pension schemes are now classifying some of the aged unremitted contributions as ‘other expenses’. Such expenses have risen to Sh12.55 billion in 2025 from Sh5.14 billion in 2021.

While the schemes cannot forgive such debt from defaulting companies, they are increasingly provisioning for the unremitted contribution to reflect the true financial position.

“Other administrative expenses mainly consist of increased provisions for doubtful debts, particularly unremitted contributions, write-offs from bad investments, and other costs that could not be classified under the specified administrative categories,” said RBA, explaining that the other expenses captured in the reports of different pensions and which accounted for 36.7 per cent of the total expenses at Sh37.29 billion.

Many employers, in both private and public sectors, could be in breach of the law in failing to remit the pension deductions.

The Retirement Benefits Act requires an employer to remit both employee's deduction as well as the employer's matching contribution to the scheme's custodian within 15 days from the end of the month the deduction was made.

The Employment Act also notes that deducting money from an employee’s salary and failing to channel it to the specified third party such as the pension trust constitutes illegal withholding of wages and a breach of the employment contract.

The lag in remittance of pension deduction has in the past been attributed to different factors including employers facing cash flow challenges due to the prevailing economic situation and instead withholding the employee’s deducted cash to maintain day-to-day business operations.

Despite the existence of a legislative framework, enforcement has failed to compel defaulting employers to remit the deductions.

The non-remitance of pension deductions to the pensions schemes has also resulted in the accrual of penalties and interest payers, which increases the liabilities for the defualting employers and with time resulting in significant huge debts that different stakeholders cast doubt as to whether they will ever be settled.