Thousands of workers at cash-strapped parastatals risk retiring empty-handed after their employers failed to remit monthly deductions to pension schemes, the National Treasury has warned.
Unremitted employer pension contributions rank as the second-largest outstanding debt for parastatals, following arrears owed to suppliers of goods and services, as well as contractors for various projects.
According to the 2024 Budget Policy Statement(BPS) , struggling parastatals have failed to remit monthly deductions to pension schemes, resulting in a significant shortfall of nearly KES 42.06 billion in employer contributions by the end of the last fiscal year.
“The Retirement Benefits Regulations require pension contributions be remitted to a custodian or guaranteed fund within ten days of every calendar month,” the statement reads in part. The BPS provides the expenditure ceilings for public entities for the financial year starting July.
“According to the Retirement Benefits Authority, as at 30th June 2023, the outstanding public sector schemes contributions amounted to Sh40.8 billion, excluding penalties and interest charged for late remittances.”
Delayed remittance of pension deductions incurs a penalty of five percent of the outstanding amount for each month the sum remains unpaid. The pending bills held by parastatals amounted to KES 443.6 billion as of June 2023, a figure that increased to KES 448.4 billion by December of the same year.
Late remittance of pension deductions is penalised in Kenya at the rate of five percent of the outstanding amount every month the sum remains unpaid.
The Treasury data shows pending bills held by parastatals stood at KES 443.6 billion as of June 2023, a figure which rose to KES 448.4 billion last December.
Treasury had estimated pension bills in the public sector to average KES 210 billion annually in three fiscal years, with some 85,400 public service workers set retire between the current financial year and the one ending June 2026.
