County governments are now staring at a deepening retirement funding gap after a Senate-backed review uncovered billions in unpaid pension obligations, pointing to widespread delays in remitting statutory deductions across devolved units.
Findings presented to the Senate County Public Accounts committee indicate that a Multi-Agency Technical Taskforce uncovered a combined pension liability amounting to billions owed by county institutions.
The Senator Moses Kajwang-led committee report states, “County Governments comprising the Executive, Assembly and Water Services Boards owe pension schemes a total of Sh.115.7 billion, inclusive of principal, interest, penalties, and the actuarial deficit.”
The analysis shows that county executives carry the largest share of the debt compared to other county arms and agencies. The taskforce reports,“The debt composition is Sh.103.2 billion by the County Executive which is 89 percent, Sh. 9.2 billion by Water Service Providers which is 8 percent and Sh.3.2 billion by the County Assembly which is 3 percent.”
According to the report, the pension arrears have built up over time, drawing from obligations inherited from local authorities and additional liabilities accumulated after devolution.
‘’Pension debt had accumulated over the years from Sh. 21.3 billion (18 percent of the total unremitted funds, inclusive of interest, penalties, and actuarial deficit) relating to the defunct Local Authorities, which accrued during the pre-devolution period, was transferred to Ksh. 115.7 billion (82 percent of the total unremitted funds) as at 31st October 2024.” The report notes.
The committee warns that several counties are exposed to financial pressure due to weak compliance in pension remittances, creating risks for both workers and pension schemes.
“The total aggregated specific fiduciary risk related topensions and pension arrears amounts Sh. 3,932,745,989.”
Specific cases highlighted in the report show instances of delayed payments and payroll inconsistencies in selected counties, including Nyeri, Narok, and Bomet.
In one example, the taskforce details,“Irregular Payment of Salaries and Personal Allowances (including overpayment of basic salary to former local authority staff, which constitutes a pensionable liability) and Unremitted Retirement Benefits Contributions amounting to Sh. 1,911,131,070.”
To curb the rising arrears, the report recommends tighter controls linking county funding to compliance with pension obligations before release of national allocations.
It states that, ‘’All County Governments must provide a certificate of compliance from county pension schemes as proof of payment or non-payment of previous year’s budget pension deductions to the Controller of Budget before release of Funds.”
Counties will also be expected to structure their budgets in line with approved repayment schedules for outstanding pension debts.
“All County Governments and their entities must prepare and approve budgets that are consistent with the repayment plans.”
The report further introduces a repayment framework based on the size of each county’s pension liability.
For smaller debts, it states, “A County Executive with a pension debt of 300 million or less shall repay the pension debt within one Financial Year effective FY 2026/27.”
For heavier obligations, a staggered repayment system has been proposed.
“A County Executive with pension debt of Sh. 1.5 billion and below shall with effect from the financial year 2026/27 make annual payments of at least Sh. 300 million per year over a period of 5 years or until full settlement, whichever comes first.”
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