Retirees are now free to use part of their pension savings to pay for healthcare.
This follows new regulations granting pension scheme members room to transfer up to 50 per cent of their accrued retirement benefits into post-retirement medical funds.
National Treasury Cabinet secretary John Mbadi said the Retirement Benefits (Post-Retirement Medical Funds) Regulations, 2026, establish a framework for dedicated medical funds designed to help workers finance healthcare costs after leaving employment.
Under the new rules, a member who retires may choose to transfer up to half of their accrued benefits in a retirement scheme to a registered post-retirement medical fund.
This means retirees will be able to set aside a significant portion of their pension specifically for medical expenses, rather than relying entirely on the cash benefits received at retirement.
“Where a member retires, the member may opt to transfer up to fifty per cent of his or her accrued benefits in a retirement benefits scheme to a registered post-retirement medical fund,” said Mbadi in the Gazette notice.
According to the regulations the funds will be retained in a medical fund to purchase insurance cover, pay for healthcare services or reimburse medical expenses as they arise.
A retiree may also transfer the money to another approved medical cover provider or use it to purchase an annuity that pays medical insurance premiums.
The regulations also allow dependants to access medical benefits from the fund, depending on the option selected by the member.
The new framework could offer relief to retirees facing rising medical costs, which have increasingly become one of the biggest financial risks for Kenyans after retirement.
Previously, pension savings were primarily structured around providing retirees with a lump sum, pension income or other retirement benefits. The new regulations create a clearer mechanism for retirees to ring-fence part of their savings for healthcare, potentially reducing the risk of exhausting their retirement income on hospital bills.
However, the transfer will be subject to the rules governing individual retirement schemes and the post-retirement medical funds receiving the money.
The regulations require trustees of retirement benefits schemes to allow members who have attained retirement age to transfer a portion of their retirement benefits into a post-retirement medical fund.
For members of pension schemes who are not in provident funds, the regulations place a separate limit of 10 percent of accrued benefits before commutation that can be transferred into a post-retirement medical fund, while additional voluntary contributions may also be moved into such funds.
The rules also allow members to make contributions to post-retirement medical funds alongside their employers, creating an opportunity for workers to begin building a dedicated healthcare reserve before retirement.
Contributions may be made as a fixed amount or as a percentage of employment income.
The regulations, made under the Retirement Benefits Act, provide for the establishment and registration of both stand-alone and internal post-retirement medical funds, which will be regulated by the Retirement Benefits Authority.
Existing post-retirement medical funds have been given 12 months from the commencement of the regulations to comply with the new framework.
