Employers threat having their financial institution accounts frozen, belongings seized and tax PINs deactivated underneath proposed authorized adjustments aimed toward implementing the remittance of pension contributions.
The Kenya Income Authority (Modification) Invoice, 2026, will empower the tax czar to gather unremitted pension contributions from employers, focusing on a rising inventory of retirement deductions withheld from employees however not transferred to pension schemes.
Unremitted pension contributions stood at Sh66.41 billion on the finish of December 2025, denying employees a possibility to develop their retirement financial savings and construct ample monetary safety for previous age.
The proposed regulation will give KRA the duty of implementing the gathering of unremitted pension deductions, akin to the robust measures meted out on companies and people who fail to pay taxes.5236572
The Retirement Advantages Authority (RBA) has been pushing for the regulation change, which might introduce stringent penalties for employers who fail to honour pension remittances.
The RBA had beforehand disclosed its proposal in a coverage notice searching for amendments to the Retirement Advantages Act and Laws for the fiscal yr starting July 1.
“…empower the authority to implement direct restoration of unremitted contributions from defaulting sponsors, together with by means of garnishee orders,” the RBA stated within the coverage notice.
“This can anchor the gathering of the unremitted contributions as a part of the capabilities of KRA underneath the Kenya Income Authority Act.”
Garnishee orders direct a 3rd occasion, similar to a financial institution, to launch funds held on behalf of a debtor and pay them instantly in the direction of an excellent obligation.
KRA is the federal government company mandated to gather and obtain income on behalf of the State and has broad enforcement powers in opposition to defaulters. Its enforcement instruments embrace debt restoration, company notices, preservation of funds and asset caveats.
Unremitted pension deductions fell to Sh66.41 billion within the six months to December 2025 from Sh72.5 billion in June, coinciding with RBA proposals aimed toward curbing the development by way of harder penalties and enforcement measures.
Public sector burden
The general public sector accounted for 93 p.c of the unremitted contributions, with non-public employers chargeable for simply seven p.c of the arrears, highlighting persistent compliance failures amongst State establishments.
County governments, public universities and different authorities businesses remained the most important defaulters, persevering with a development that has repeatedly uncovered weaknesses in public payroll and expenditure controls.
Most defaults have been concentrated in entities that rely closely on Exchequer funding, the place delayed Treasury disbursements disrupt statutory funds.
County governments have been significantly affected, grappling with delayed transfers, rising wage payments and competing recurrent expenditure obligations.
The unpaid deductions signify cash already withheld from employees’ salaries however not remitted to pension schemes, delaying funding returns and eroding retirement financial savings.
At current, late remittance of pension contributions attracts penalties of Sh20,000 or 5 p.c of the excellent quantity per thirty days, whichever is larger.
The RBA has beforehand proposed imposing private legal responsibility on chief executives of companies that fail to remit pension contributions, whereas additionally searching for to strengthen penalties and curiosity provisions.
The surge in unremitted pension contributions means that present sanctions have failed to discourage the follow.
“It’s purely indiscipline as a result of for those who have a look at it from a authorities viewpoint, all authorities businesses have budgets that they put together on an annual foundation,” stated RBA chief government Charles Machira in a earlier interview.
“These budgets are remitted to the Nationwide Treasury for approval or by way of their line ministry.”
The RBA has additionally proposed reforms which have but to be adopted into regulation, together with the creation of a two-pot system in Kenya’s retirement advantages sector.
The introduction of sub-accounts is anticipated to make pension advantages extra aggressive relative to different financial savings merchandise.
The regulator has additional proposed waiving VAT and excise obligation on retirement profit scheme administration, administration bills and audit charges.
