County employees could face uncertainty over their retirement benefits for years to come unless the Senate moves swiftly to address Sh115.9 billion in unpaid pension contributions, the Parliamentary Budget Office (PBO) has warned.
In its Budget Watch 2026 report, the budget office called for urgent action on proposals designed to help counties settle the outstanding debt, noting that recommendations developed by a multi-agency task force have yet to be implemented despite the reconciliation of the liabilities.
The delay has prolonged the pension crisis, increased the financial burden facing county governments and left workers unsure whether the money deducted from their salaries will be available when they retire.
The PBO says resolving the problem requires more than administrative action, urging the Senate to consider the task force’s findings and strengthen measures to ensure counties transfer pension deductions to the appropriate schemes.
Established in November 2024, the multi-agency task force proposed changes to pension calculations, repayment arrangements for outstanding debts and legal reforms to ensure county governments remit contributions collected from their employees.
The budget office wants the Senate to fast-track consideration of the report and follow up on the implementation of its recommendations. The proposed legal changes include amendments to the Public Finance Management Act and the Kenya Revenue Authority Act.
“The Senate should expedite the tabling and consideration of the Multi-Agency Taskforce Report on County Pension Arrears and monitor the implementation of its recommendations,” PBO led by Martin Masinde said.
The report places particular emphasis on the failure by some county governments to remit statutory deductions, even after withholding the money from workers’ monthly salaries.
By December 2025, counties had accumulated Sh115.9 billion in pension liabilities, covering unpaid contributions, interest, penalties and actuarial deficits.
County executive departments account for Sh103.2 billion of the outstanding amount. Water service providers owe Sh9.3 billion, while county assemblies have liabilities of Sh3.2 billion.
The debt comprises Sh94.6 billion that accumulated after the start of devolution in 2013 and a further Sh21.3 billion inherited from the defunct local authorities.
Nairobi County has the largest outstanding pension bill at Sh48.2 billion, followed by Mombasa, which owes Sh19.1 billion.
The arrears affect three pension schemes, with the Local Authorities Provident Fund (LAPFUND) carrying the highest amount at Sh57.9 billion. The Local Authorities Pension Trust (LAPTRUST) is owed Sh48.5 billion, while the County Pension Fund (CPF) has outstanding liabilities of about Sh9.5 billion.
Nyeri and Lamu have the smallest recorded pension debts, at Sh20.2 million and Sh23.1 million respectively.
The growing liabilities have raised questions about the ability of pension schemes to meet their obligations to retired county workers. The PBO maintains that deductions made from employees’ earnings belong to the workers and should be transferred to the pension funds for which they were collected.
When counties fail to remit the money, employees risk losing access to the full retirement benefits they have earned. The report warns that such failures also undermine workers’ constitutional right to social security.
The budget office further cautions that pension schemes could face difficulties recovering the money if county governments remain unable to clear their obligations.
Under such circumstances, the schemes could be treated as unsecured creditors, leaving members exposed to the possibility of recovering only a portion of their expected retirement benefits.
LAPTRUST faces a particular concern because it is the only defined-benefit scheme among the three funds. Members of such schemes are promised retirement benefits calculated according to established rules, making adequate funding essential to meeting future payments.
The report notes that defined-benefit schemes must maintain full funding to honour their commitments. Continued shortfalls caused by unpaid contributions could threaten their ability to provide the benefits promised to members.
The pension problem is also part of a wider pattern of delayed payments and outstanding statutory deductions within county governments.
The PBO report shows that Sh43.64 billion in unpaid salaries and unremitted statutory deductions had remained outstanding for more than three years as of the third quarter of the 2025/26 financial year.
The figures add to concerns about the management of public funds at county level, particularly where money has already been deducted from employees but has not reached the institutions meant to receive it.
The PBO is now calling for the Senate to take up the task force’s recommendations and monitor their implementation, with the aim of establishing a clearer path towards settling the arrears and ensuring future pension contributions are paid on time.
Without effective enforcement and a workable repayment plan, the outstanding debt could continue to weigh on county finances while exposing public workers to uncertainty over the savings intended to support them after retirement.