County workers could soon have clearer rules on how much they contribute and how much their employers put into their retirement savings.
Two proposed laws now before Parliament further seek to define how the county workers would receive their money when they leave service.
Counties face a pension crisis, with billions of shillings in unpaid retirement contributions leaving workers and retirees uncertain about their benefits.
The County Governments Retirement Scheme Bill, 2026, seeks to establish a new retirement scheme for eligible county state officers, public officers and employees.
Separately, the Local Authorities Provident Fund (Amendment) Bill, 2026, seeks to transform the existing provident fund into the County Governments Retirement Fund.
The Lapfund bill seeks to align the fund with the devolved system of government, changes that could reshape the retirement system for county workers.
The County Governments Retirement Scheme Bill proposes a minimum employee contribution of 7.5 per cent of pensionable emoluments.
The county government or other sponsor would contribute up to twice the employee contribution or 20 per cent of pensionable emoluments, whichever is lower.
The bill also requires the contributions due from a county government to be charged directly to the County Revenue Fund as a first charge.
If enacted, county workers may be freed from the current situation where pension deductions are competing with other county spending.
Contributions not paid within the prescribed period would attract interest, while unpaid contributions and interest would become a civil debt recoverable from the sponsor.
In the new dispensation, a member's benefits from statutory and personal contributions would vest immediately in the worker.
At retirement, a worker could request a lump sum of up to one-third of the balance in their retirement savings account.
Additional voluntary contributions and accrued interest will be withdrawable in full if the proposed law is enacted.
The worker could alternatively opt for monthly or quarterly income drawdown, allowing the remaining savings to stay invested while providing an income.
Another option would be a monthly or quarterly annuity for life purchased from an approved provider.
The bill also provides that payment of retirement benefits should begin from the end of the month immediately following the member's request for payment.
The framework seeks to also provide protections for workers who leave before retirement.
A member who leaves employment after one year but before reaching the prescribed early retirement age could withdraw up to 50 per cent of accrued benefits.
The balance would remain in the scheme or be transferred to another registered scheme.
The bill allows full withdrawal before early retirement age in specified circumstances, including ill health and permanent emigration.
The proposed scheme would also give county employees a greater role in managing their retirement savings.
For its part, the Local Authorities Provident Fund (Amendment) Bill provides a parallel transition from the old local authority system.
It proposes renaming the fund the County Governments Retirement Fund and replacing references to ‘local authority’ with ‘sponsor’.
County executives, county assemblies, county public service boards, county assembly service boards, county water service providers and county agencies are targeted in the scheme.
It sets a minimum employee contribution of 7.5 per cent and employer contributions of up to twice the employee rate or 20 per cent of pensionable emoluments, whichever is lower.
It proposes benefits including annuities, lump-sum pension commutation, income drawdown and gratuity.
Members, assets, liabilities, rights and obligations will be transferred from the Local Authorities Provident Fund to the new County Governments Retirement Fund.
The proposed reforms came at a time a number of counties are grappling with failing pension systems.
National Treasury told the Senate in August that county pension liabilities had grown from Sh21.3 billion inherited from defunct local authorities at devolution to Sh115.7 billion by October 2024.
County executives accounted for Sh103.2 billion, water service providers Sh9.3 billion and county assemblies Sh3.2 billion.
Only 10 county executives and nine county assemblies had validated their liabilities by June 18, 2026.
The problem is more pronounced in Nairobi and Mombasa where pension schemes have put the claims against the counties at billions of shillings, including penalties and actuarial liabilities.
The Retirement Benefits Authority recently reported that unremitted pension contributions rose from Sh47.16 billion in June 2024 to Sh55.83 billion by June 2025.
County governments and public universities accounted for most of the outstanding contributions.
