Ksh100B in County arrears: What new Pension Bill means for County workers

A proposed retirement benefits framework for county employees in Kenya could generate financial strain for local governments, according to concerns raised by officials during a recent committee hearing on October 21, 2026. The County Governments Retirement Scheme Bill, 2026, aims to consolidate pension arrangements for county workers but has drawn criticism over potential liabilities and governance issues.

Controller of Budget Margaret Nyakang’o cautioned that the scheme must be backed by a clear financial plan to prevent creating further county budgetary burdens. She highlighted a reported Ksh100.24 billion in outstanding salary arrears and an estimated Ksh35 billion in additional annual expenditure if counties contribute 15 per cent of employee salaries to the new pension fund.

These figures pose significant challenges, as the new scheme might inherit unverified financial obligations from existing retirement arrangements without proper evaluation.

The Controller of Budget warned that counties already allocate about 42 per cent of their revenue to employee compensation, exceeding the statutory ceiling of 35 per cent. She urged Parliament to assess the Bill’s financial implications before implementation, emphasizing the need to prevent the inheritance of unsustainable financial liabilities.

Stakeholders have called for amendments to address funding gaps, governance, and workers’ rights. The Bill’s proposed 15 per cent employer contribution could mean an extra Ksh35 billion in annual spending for counties, straining budgets already allocated to salaries, healthcare, infrastructure, and other services. Nyakang’o suggested holding county officials accountable for fines imposed on late payments, but committee chairperson Kuria Kimani urged a distinction between deliberate defaults and delays caused by late fund disbursement.

The proposed retirement scheme seeks to unify existing pension arrangements for county employees and specified state officers, with provisions for transferring accumulated benefits and ensuring compliance. Committee members emphasized the need for protective measures for Members of County Assemblies and their existing pension contributions.

The National Assembly’s Finance and National Planning Committee is weighing stakeholder submissions as it deliberates on the proposed legislation, balancing the benefits of a consolidated retirement system against the financial and governance challenges it presents.