Employers risk having their bank accounts frozen, assets seized, and tax PINs deactivated for failing to remit pension contributions under a law change aimed at enforcing the remittances and easing old-age poverty.
The Kenya Revenue Authority (Amendment) Bill, 2026, will allow the tax authority to collect unremitted pension from employers in a fresh attempt to reduce the mounting stock of retirement benefits deducted from workers’ payslips and not remitted to schemes for investment.
The unremitted pension stood at Sh66.41 billion at the end of December 2025 from Sh47.1 billion in June 2024.
This has seen workers lose out on compounded investment income from their monthly pension contributions amid inadequate payouts that is forcing many retirees or to continue working.
The change in law will allow the KRA to enforce the collection of unremitted pension deductions, akin to the tough measures meted out on firms and individuals who fail to pay tax.
Section 42 of the Tax Procedures Act empowers the KRA to deactivate PINs, issue travel bans, collect cash due from the taxpayer’s banker and prosecute executives for defaults and evasion.
The pension regulator–the Retirement Benefits Authority (RBA)—has been lobbying to have KRA pursue pension defaulters through the law change, allowing the taxman to hand out stringent penalties for employers who deduct and fail to transfer pension contributions to the schemes.
RBA disclosed its wish in policy briefs.
“…empower the authority to enforce direct recovery of unremitted contributions from defaulting sponsors, including by way of garnishee orders,” the RBA said in the policy note.
“This will anchor the collection of the unremitted contributions as part of the functions of KRA under the Kenya Revenue Authority Act.”
Garnishee orders a third party, like KRA, to seize money from a bank belonging to firms in default and remit it directly to a pension scheme.
KRA has agency notices, a directive issued by the taxman under Section 42 of the Tax Procedures Act, compelling a third party, such as a bank or employer, to recover unpaid taxes from a defaulter’s account and remit them to KRA.
It will rely on the clause to punish firms that default on pension contributions.
KRA lists various enforcement measures, including the recovery of debts, issuance of agency notices, preservation of funds and assets caveats.
Unremitted pension deductions eased to Sh66.41 billion over six months to December 2025, falling from Sh72.5 billion in June, with public institutions accounting for the bulk of unpaid retirement contributions.
The ease coincided with the RBA’s proposal for the introduction of higher fines.
The parastatals accounted for 93 percent of the unremitted deductions, with private employers making up just seven percent of arrears, underscoring persistent compliance failures among State-owned institutions.
County governments, public universities and other government agencies remained the largest defaulters, continuing a trend that has repeatedly exposed weakness in public payroll and expenditure controls.
Most defaults have been concentrated in entities that rely heavily on exchequer funding, where delayed Treasury disbursements disrupt statutory payments.
County governments have been the most exposed, grappling with delayed transfers, rising wage bills and competing recurrent obligations.
The unpaid deductions represent money already withheld from workers’ salaries but not remitted to pension schemes, which delays investments and erodes retirement savings.
At present, late remittance of pension contributions attracts penalties of Sh20,000 or five percent of the outstanding amount per month, whichever is higher.
The RBA has previously proposed to impose personal liability on chief executive officers of firms that fail to remit pension contributions, while seeking to increase penalties and interest for defaulters.
The surge in non-remittance of pension contributions suggests that current sanctions have failed to deter the vice.
“It is purely indiscipline because if you look at it from a government point of view, all government agencies have budgets that they prepare on an annual basis,” said RBA chief executive officer Charles Machira in a previous interview.
“Those budgets are remitted to the National Treasury for approval or through their line ministry.”
Kenya also suffers from low pension coverage, with more than 70 percent of Kenyans retiring without a pension, save for the less-than-sufficient payout from the NSSF.
The NSSF’s monthly contributions stood at Sh400, including the Sh200 matched by the employers, for years and the fund on average paid out less than Sh250,000 when a member retires.
The have since been increased to a maximum of Sh12, 960, including Sh6, 480 from employers.
Kenyans, on average, are living longer and the rank of the elderly poor is rising as the traditional social fabric yields to the forces of rapid urbanisation and changing social and family trends.
In the past, social security was not a bother to many Kenyans because there was a large extended family to fall back on in the rural areas, but as the social fabric changes and more people opt to retire in urban centres, the trend is increasingly becoming a headache to policymakers.
This is what prompted the State to start a monthly stipend of Sh2,000 for those above 70 years to cushion them from old-age poverty.
