Employers risk having their bank accounts frozen, assets seized and tax PINs deactivated under proposed legal changes aimed at enforcing the remittance of pension contributions.
The Kenya Revenue Authority (Amendment) Bill, 2026, will empower the tax czar to collect unremitted pension contributions from employers, targeting a growing stock of retirement deductions withheld from workers but not transferred to pension schemes.
Unremitted pension contributions stood at Sh66.41 billion at the end of December 2025, denying workers an opportunity to grow their retirement savings and build adequate financial security for old age.
The proposed law will give KRA the responsibility of enforcing the collection of unremitted pension deductions, akin to the tough measures meted out on firms and individuals who fail to pay taxes.5236572
The Retirement Benefits Authority (RBA) has been pushing for the law change, which would introduce stringent penalties for employers who fail to honour pension remittances.
The RBA had previously disclosed its proposal in a policy note seeking amendments to the Retirement Benefits Act and Regulations for the fiscal year beginning July 1.
“…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 direct a third party, such as a bank, to release funds held on behalf of a debtor and pay them directly towards an outstanding obligation.
KRA is the government agency mandated to collect and receive revenue on behalf of the State and has broad enforcement powers against defaulters. Its enforcement tools include debt recovery, agency notices, preservation of funds and asset caveats.
Unremitted pension deductions fell to Sh66.41 billion in the six months to December 2025 from Sh72.5 billion in June, coinciding with RBA proposals aimed at curbing the trend through tougher penalties and enforcement measures.
Public sector burden
The public sector accounted for 93 percent of the unremitted contributions, with private employers responsible for just seven percent of the arrears, highlighting persistent compliance failures among State institutions.
County governments, public universities and other government agencies remained the largest defaulters, continuing a trend that has repeatedly exposed weaknesses 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 particularly affected, grappling with delayed transfers, rising wage bills and competing recurrent expenditure obligations.
The unpaid deductions represent money already withheld from workers’ salaries but not remitted to pension schemes, delaying investment returns and eroding 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 imposing personal liability on chief executives of firms that fail to remit pension contributions, while also seeking to strengthen penalties and interest provisions.
The surge in unremitted pension contributions suggests that existing sanctions have failed to deter the practice.
“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 Charles Machira in a previous interview.
“Those budgets are remitted to the National Treasury for approval or through their line ministry.”
The RBA has also proposed reforms that have yet to be adopted into law, including the creation of a two-pot system in Kenya’s retirement benefits sector.
The introduction of sub-accounts is expected to make pension benefits more competitive relative to other savings products.
The regulator has further proposed waiving VAT and excise duty on retirement benefit scheme management, administration expenses and audit fees.
