County governments are facing mounting pressure to explain how they will clear Sh118.8 billion in unpaid pension obligations, with senators demanding firm repayment commitments as a new payroll system seeks to stop retirement contributions from remaining unpaid after deductions are made from workers’ salaries.
The outstanding amount, presented by Retirement Benefits Authority (RBA) Chief Executive Officer Charles Machira, comprises Sh17.7 billion in principal, Sh99.1 billion in accumulated penalties and a Sh2 billion actuarial deficit.
The figures have brought renewed attention to the growing cost of unpaid pension contributions and the responsibility of county administrations to ensure employees’ retirement savings reach the institutions managing their benefits.
The demand for action comes as a new remittance arrangement, introduced on July 1, 2026, seeks to improve the transfer of pension contributions and other statutory deductions through county payroll systems.
While the new arrangement is expected to reduce the risk of further defaults, it does not clear the debts accumulated over previous years. Senators are therefore pushing for a separate plan to address the existing liabilities and ensure county governments take responsibility for the outstanding payments.
Sh100.24 Billion in Unpaid County Obligations
The pension debt is part of wider concerns about unpaid obligations to county workers, including salaries, statutory deductions and other employment-related claims.
Controller of Budget Margaret Nyakang’o told the Senate Committee on Labour and Social Welfare that county governments had reported Sh100.24 billion in outstanding salary arrears and statutory deductions by June 30, 2026.
Figures contained in reporting on the Controller of Budget’s 2025/2026 review show that county executive departments accounted for Sh98.44 billion, while county assemblies reported Sh1.80 billion.
The total covers several categories of unpaid obligations and is not an additional Sh100.24 billion in pension debt. It includes salary arrears, deductions awaiting transfer to the relevant institutions and other outstanding claims involving county employees.
The figures raise questions about the handling of public funds, particularly where money has already been deducted from employees’ pay but has yet to reach the institutions meant to receive it.
For workers approaching retirement, such delays can make it difficult to establish whether all the contributions taken from their salaries during their years of service have been received by their pension schemes. This uncertainty can complicate the process of confirming their savings and accessing benefits after leaving employment.
The breakdown of the Sh118.8 billion pension debt presents another concern. Accumulated penalties stand at Sh99.1 billion, far above the Sh17.7 billion in principal, while the remaining Sh2 billion is attributed to an actuarial deficit.
The figures show how unpaid obligations can grow as penalties accumulate over time. However, determining the amount each county must pay will require a clear review of the outstanding contributions, penalties and other reported liabilities.
Authorities will also need to confirm the figures and distinguish pension obligations from other salary arrears and staff claims to avoid counting the same debt under different categories.
A new system has been introduced to address gaps in the handling of statutory deductions, particularly where county employees’ salaries are reduced but the corresponding funds are not transferred promptly to the intended institutions.
During her appearance before the Senate committee, Nyakang’o said the arrangement connects the Integrated Financial Management Information System (IFMIS) with the Central Bank of Kenya’s system to support direct remittances.
The integration is intended to make the transfer of statutory deductions part of the payroll process, reducing the risk of funds being redirected to other expenses after they have been deducted from employees’ earnings.
The measure is part of wider efforts to improve public payroll management through automation and tighter controls over statutory payments. The National Treasury has also pointed to the integration of the Human Resource Information System-Kenya with IFMIS as a step intended to improve compliance and limit manual intervention.
However, the impact of the changes will depend on how consistently they are applied across county governments. Reliable reconciliation of payroll transactions and action against entities that fail to comply will also be important in ensuring the system achieves its intended purpose.
The new arrangement is meant to reduce the likelihood of fresh arrears building up, but it does not automatically settle contributions that counties failed to remit in earlier years.
County administrations will therefore have to address the existing debt through separate repayment measures while ensuring that current deductions are transferred on time.
Senators Push for Clear Repayment Timelines
Senators are seeking county-specific repayment plans that show how each administration intends to clear its outstanding pension obligations.
They have called on the National Treasury, the Council of Governors and other senior decision-makers to attend the next round-table meeting and commit to practical steps for resolving the debt.
The proposed meeting is expected to bring the relevant institutions together to discuss the outstanding liabilities and develop a workable approach to repayment.
Under a county-by-county arrangement, authorities would establish the amount owed by each government, set repayment targets and monitor whether the agreed payments are being made.
Such plans would also make it easier to identify counties that are falling behind and determine what further action may be required to keep them on track.
Before repayment begins, the responsible institutions will need to establish the amounts that have been verified and separate pension contributions from salary arrears, other statutory deductions, penalties and outstanding staff claims.
This distinction is important because the different categories of debt may require separate checks and could otherwise lead to the same obligation being counted more than once.
The task will go beyond identifying the total amount owed. County governments will need to show how their repayment commitments can be supported by their budgets, while national institutions will be expected to coordinate the process and maintain oversight.
The National Treasury and county leadership will therefore be central to efforts to turn the proposed repayment plans into actual payments.
The next round-table meeting is expected to provide an opportunity for the parties to agree on the steps required to address the arrears, including how progress will be tracked and what action should follow when agreed targets are missed.
The dispute has direct implications for former county employees who depend on their retirement benefits for financial support after years of public service.
Pension contributions are intended to provide workers with income after they leave employment, making the timely transfer of deductions an important part of protecting their retirement savings.
When contributions remain unpaid, employees may face uncertainty over the status of their benefits and whether the money deducted from their salaries has reached the pension schemes responsible for managing it.
The matter has also drawn parliamentary attention through earlier efforts to address unpaid statutory deductions. In August 2026, a Senate committee rejected a request to extend the mandate of a multi-agency task force established to deal with the non-remittance of pension contributions and other statutory deductions by county governments.
The development added to scrutiny of the measures being taken to address the problem and the need for clear progress on outstanding obligations.
The latest demand for repayment plans now places renewed focus on whether the National Treasury, county governments and other responsible institutions can agree on a practical settlement framework.
Progress will need to be measured through verified figures for each county, repayment schedules supported by funding, regular reporting and evidence that current deductions are reaching the institutions entitled to receive them.
Although the new payroll arrangement could help prevent further defaults, it will not by itself resolve the historical pension debt.
County governments will still have to account for the unpaid contributions and set out how they intend to settle the outstanding amounts. At the same time, the relevant national institutions will need to support the process through coordinated financial planning and continued oversight.
For retirees waiting for their benefits and serving workers whose contributions have yet to be remitted, the main concern is whether the new controls will lead to real progress in clearing the arrears.
The next round-table meeting will therefore be a key opportunity for the responsible institutions to move from discussions to clear repayment commitments. Its outcome will help determine whether counties can begin reducing the historical debt while ensuring that contributions deducted from workers’ salaries are transferred to the right institutions without further delays.