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Millions of Kenyans are heading towards retirement without any formal and structured income source, exposing them to financial burdens and dependency, an industry report indicates.
The country’s pension coverage still remains low despite the rapid expansion of the retirement benefits industry.
Retirement Benefits Authority (RBA) latest data shows pension assets grew by 26.84 per cent to Sh2.83 trillion in 2025, up from Sh2.23 trillion in 2024.
However, the growth masks a major challenge where millions of workers, particularly those in the informal economy, remain outside the formal pension system.
The RBA 2025 Statistical Digest shows only 7.71 million people were members of retirement benefits schemes against an estimated working-age population of 29 million, translating to coverage of 26.58 per cent.
Against an estimated 21.6 million people in formal and informal employment, only 4.02 million were active pension members.
“This put active pension membership at just 18.6 per cent of the employed population,” RBA notes in its report.
The figures point to a widening retirement security gap, with the majority of workers unlikely to have accumulated adequate savings when they eventually leave the labour market.
The challenge is compounded by unpaid pension deductions. Although total contributions rose 29 per cent between 2021 and 2025, to Sh309.26 billion, unremitted contributions stood at Sh84.16 billion last year.
Of this amount, Sh73.14 billion was overdue by more than 30 days, almost three times the Sh25.35 billion recorded in 2021.
Occupational schemes accounted for Sh63.76 billion of contributions overdue by more than 30 days, while defined contribution schemes accounted for Sh66.46 billion.
“For workers approaching retirement, delayed remittances can have serious consequences. Money deducted from salaries but not transferred to pension schemes cannot be invested and earn returns for members, potentially reducing the eventual retirement benefit,” the regulator said.
The problem is particularly significant because Kenya’s pension system is increasingly shifting towards defined contribution schemes.
This is a retirement savings plan where fixed amounts or percentages of an employee’s salary are regularly paid into an individual account by both the employee and the employer, with the final retirement payout depending on the total contributions made and accumulated investment return.
These held Sh2.56 trillion, or 90.4 per cent of total retirement assets in 2025, meaning the eventual benefit largely depends on how much workers save and how their investments perform.
Investment income remains a major driver of the industry. Pension schemes generated Sh274.81 billion in investment income last year, up from Sh222.18 billion in 2024.
Government securities accounted for Sh165.8 billion, or 60.3 per cent of the total.
The Sh2.83 trillion pension pot, should however not be interpreted as money available to individual retirees, as the assets are spread across millions of members, with significant concentration among large schemes.
Schemes holding assets of Sh10 billion and above accounted for 62.92 per cent of total fund value, despite comprising only 55 schemes.
Meanwhile, retirement benefits paid out by schemes increased to Sh141.76 billion in 2025 from Sh128.14 billion in 2024.
Leavers received Sh74.57 billion, while commutations and lump-sum benefits amounted to Sh48.55 billion. Regular pension payments stood at Sh16.43 billion.
The heavy reliance on lump-sum payments raises concerns over whether retirees can make their savings last throughout old age.
While a lump sum can help retirees clear debts, build homes or invest in businesses, poor financial planning can quickly deplete the money, leaving retirees dependent on family members or other sources of support.
This, as healthcare is seen to be an emerging threat to retirement security.
Contributions to post-retirement medical funds increased sharply from Sh249.15 million to Sh1.86 billion in 2025 as more schemes established medical funds for members.
“The development underscores the need for retirement planning to cover both income and healthcare, particularly as medical expenses increase with age,” the regulator notes.
While occupational schemes are providing a foundation for retirement, millions in the informal sector face irregular incomes that make consistent long-term saving difficult.
“The challenge for policymakers and the industry is to expand coverage, ensure employers remit deductions promptly and help workers convert accumulated savings into sustainable income,” notes RBA.
