Treasury Cabinet Secretary John Mbadi has warned county governors over the non-remittance of pension contributions, now exceeding Sh40 billion.
Speaking at the 14th Annual General Meeting of the Local Authorities Provident Fund (LAPFUND) in Kisumu, Mr Mbadi decried the persistent failure of county governments to remit pension dues, warning that the debt threatens the sustainability of public sector pension schemes.
“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.
“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 asserted.
He further emphasized the need for legislative safeguards to prevent newly elected governors from arbitrarily switching pension schemes after 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,” the CS added.
His remarks came in response to concerns raised by Roba Duba, Secretary General of the County Government Workers Union, who revealed that counties have accrued pension arrears over the past 21 years, making investment within LAPFUND nearly impossible.
“My attempts to resolve this issue have been frustrating. I hope the new Treasury CS will tackle it head-on,” said Mr Duba.
In response, Mr Mbadi scheduled a follow-up meeting with Duba to iron out the issues.
He stressed the critical role of the pension sector in Kenya’s economic development, managing over Sh2.3 trillion in assets.
While advocating for diversified investments beyond traditional instruments, the CS warned against risky ventures that could jeopardize 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,” he said.
He urged pension schemes to embrace Public-Private Partnerships, especially in infrastructure, to boost economic growth and generate higher returns for contributors.
Kisumu Deputy Governor Mathew Owili echoed the concerns and pledged to uphold staff autonomy in pension matters.
“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 affirmed.
Governor Anyang’ Nyong’o, in a speech read on his behalf by Dr Owili, encouraged LAPFUND to invest in green initiatives, affordable housing, and tourism in partnership with the county.
“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,” he stated.
He also reminded county staff that they should set in motion their retirement plans early enough and take a keen interest in understanding their pension schemes.
