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County pension arrears hit Sh50bn as governors demand arrests
Council of Governors Chairman and Wajir Governor Ahmed Abdullahi (centre) with fellow governors during a press briefing in Nairobi on September 1, 2025.
The Council of Governors has called for criminal prosecution of county officials responsible for unremitted pension deductions that have now ballooned to more than Sh50 billion.
According to Retirement Benefits Authority (RBA) CEO Charles Machira, quasi-government agencies, including counties, owe more than Sh71.4 billion in unremitted deductions.
While the CPF Group, the county workers' pension manager, continues to record growth in membership and assets, non-remittance of deductions has been cited as a major hindrance to the funds.
Speaking during the CPF Group Annual General Meeting, CEO Hosea Kili said they were in talks with county governments, the Council of Governors and the National Treasury to address the arrears, which risk dampening growth.
“The fund achieved a strong annual return of 10 percent, underscoring the resilience of this long-term investment. However, non-remittance of contributions by employers is a big challenge. I do not understand how a salary, which is supposed to be paid together with the statutory deductions, is paid but then the statutory deductions are not remitted,” Mr Kili said.
He noted that LAPTRUST Scheme’s asset growth, which stands at about Sh27 billion, has been slowed by unremitted deductions amounting to more than Sh50 billion.
The Council of Governors (CoG) Chairman Ahmed Abdullahi said non-remittance of statutory deductions was a criminal offence that must be dealt with.
"It is criminal to deduct an employee’s money and fail to remit it. It is unfortunate that the duty bearers, including payroll officers, auditors, county assemblies and the Senate, have failed to enforce remittance. In fact, county officials who oversee the payment of salaries and fail to remit deductions must be arrested," Mr Abdullahi said.
He said remittances that remain unpaid for more than one year become impossible to settle due to budget constraints.
“The pension fund managers must ensure that the current county administrations do not end their term with arrears. Arrears that have built up in the past should be addressed separately. A payment plan should be developed for arrears that cannot be paid now,” Mr Abdullahi said.
Stakeholders have also proposed several measures, including debt-asset swaps, the issuance of Treasury bonds and payment at source to address the non-remittance issue.
Mr Kili appealed to the Council of Governors to ask the National Treasury to issue a Treasury bond on behalf of the 47 counties to fast-track payment of the arrears.
IGTRC CEO Kipkurui Chepkwony supported calls to deduct pension contributions at source to ensure compliance by county governments.
This, he said, can be effectively enforced through the single salary payment system in the public service.
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"The IGTRC is working with the Council of Governors, National Treasury and pension schemes to implement the proposed solution. The question we should ask is whether the funds should be deducted from the Treasury or from the County Revenue Fund accounts. Deduction at source would be the most viable solution,” Mr Chepkwony said.
The IGTRC CEO also challenged CPF and county governments to consider asset-debt swaps to resolve the historical pension arrears.
However, CoG CEO Mary Mwiti said the only viable way to address the non-remittance of deductions was proper enforcement of the law.
"I want to confirm the PFM Act does not allow for the deduction of pension contributions at source. So, what is left for us is to ensure enforcement of the law. We must ensure that when salaries are paid, statutory deductions are remitted for every employee," she said.
Devolution PS Michael Loikenu said the government is working on sector reforms, including exploring deductions at source to stop the non-remittance of pension deductions.
“We will soon convene a human resource sector forum to see how we can address the issue of deductions,” he said.
Retirement Benefits Authority CEO Charles Machira revealed that pension funds in Kenya crossed the Sh3 trillion mark by the end of June.
Mr Kili said the county pension fund saw its net assets rise from Sh51.6 billion in 2024 to Sh68 billion now, representing growth of more than 32 percent.
He said the County Pension Fund's membership had grown to more than 163,000 members, against a county government workforce of more than 250,000.
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