After enduring months of uncertainty, nearly 7,000 retired public servants are finally set to receive their overdue pension payments, ending a prolonged standoff between the Treasury and tax authorities.
The announcement brings relief to former teachers, civil servants, and other public officers who had gone without retirement benefits since leaving service.
Treasury Cabinet Secretary John Mbadi said the decision follows extensive discussions aimed at resolving the impasse that had left thousands of retirees financially strained.
The dispute arose when the Treasury sought to have all pending pension payments benefit from a new tax exemption, while the Kenya Revenue Authority argued that the relief only applies to payments falling due after December 27, 2024, the effective date of the law.
“To prevent further hardship to the 7,000 affected retirees, the Pensions Department has resolved on immediate disbursement by processing these payments subject to the prevailing tax regime that existed before the amendment,” Mbadi said.
This means that retirees whose claims had not been processed before the exemption took effect will have their pensions taxed under the previous system.
The Treasury has sought a legal opinion from the Attorney General on whether these transition cases should qualify for the exemption.
“Should the Attorney General advise that these payments ought to have been exempt, a mechanism will be instituted to refund the deducted tax to the affected beneficiaries,” Mbadi added.
He emphasized that all public officers retiring on or after December 27, 2024, are fully exempt from paying income tax on their monthly pensions and lump sum gratuities.
The delay had caused significant stress among retirees, with files piling up at Bima House, where the Pensions Department is located. In October last year, Mbadi had revealed that multiple meetings between Treasury officials and KRA had failed to resolve the differences, leaving thousands of retirees in limbo.
The issue stems from changes introduced by the Tax Laws (Amendment) Act, 2024 and later the Finance Act, 2025. The amendment, assented to on December 11, 2025, and effective from December 27, 2024, exempts pension benefits from registered schemes from income tax, aiming to increase retirees’ take-home pay and cushion them against the rising cost of living.
With the Treasury now directing immediate payment, the backlog of unprocessed pension claims will be cleared, providing long-awaited financial relief to former public servants who have endured months of waiting.
