Interview | Charles Machira: ‘Kenya’s Pension Sector is no Longer Just a Social Safety Net’

By John Njiru

Kenya’s retirement benefits sector has reached an important milestone. Pension assets now stand at KSh2.83 trillion. This is equivalent to 16.01 per cent of GDP, making pension funds among the country’s largest institutional investors and an increasingly important source of long-term domestic capital.

Yet behind this remarkable growth lies a different story. More than 70 per cent of Kenya’s working-age population still lacks pension coverage, while billions of shillings deducted from workers’ salaries remain unremitted by employers.

In this interview, our Special Projects Editor John Njiru sat down with the Retirement Benefits Authority (RBA) Chief Executive Charles Machira who explains what is driving the industry’s rapid expansion, why pension funds continue to favour government securities, how the Authority plans to bring informal sector workers into retirement savings, and the reforms shaping the sector’s next phase of growth.

 

Q: Pension assets have grown from about KSh1.84 trillion in 2023 to KSh2.83 trillion by the end of 2025. What has driven this remarkable growth?

Machira: The expansion of Kenya’s pension assets under management to more than KSh2.8 trillion is a landmark achievement driven by three principal factors.

First is the phased implementation of the NSSF Act, 2013, which significantly expanded monthly contributions by increasing both lower and upper earnings limits across the formal workforce.

Second, fund managers benefited from strong investment performance, particularly high-yield fixed-income securities and a recovery in blue-chip equities listed on the Nairobi Securities Exchange. Strong investment returns substantially boosted scheme assets.

Third, macroeconomic stability – including favourable inflation, exchange rate stability and prudent monetary policy – helped preserve real asset values. At the same time, enhanced regulatory compliance and consolidation into larger professionally managed schemes improved operational efficiency and investment management.

 

Q: Pension assets now account for approximately 16 per cent of Kenya’s GDP. Why is this milestone significant?

Machira: Crossing the 16 per cent pension-to-GDP threshold signals that the retirement sector is no longer just a social safety net – it has become a core engine of national economic stability.

Kenya now performs above the average for sub-Saharan and non-OECD economies, demonstrating significant progress in developing long-term domestic savings. At the same time, compared with mature OECD pension systems where pension assets frequently exceed 90 per cent of GDP, the milestone also highlights the substantial opportunity that remains for further financial deepening.

As pension assets continue to grow, they will increasingly influence capital market development, financial stability and long-term investment across the economy.

 

Q: More than half of pension assets remain invested in government securities. Is that healthy?

Machira: Government securities accounted for 50.98 per cent – or approximately KSh1.39 trillion – of pension assets in 2025. They remain the single largest asset class, followed by guaranteed funds, quoted equities and immovable property.

Historically, this allocation has served pension schemes well. Government securities have delivered stable, risk-adjusted returns that protected members’ savings, particularly during periods of market volatility.

However, as interest rates ease and capital markets mature, excessive reliance on government paper creates reinvestment risk. The industry has significant untapped capacity to diversify into productive sectors of the economy while remaining within the existing regulatory framework.

To support this transition, the Authority has broadened statutory investment limits, allowing pension schemes greater exposure to alternative investments such as public-private partnerships, affordable housing and green energy projects without compromising fiduciary responsibilities.

 

Q: Despite rapid asset growth, pension coverage remains at just 26.58 per cent of the working-age population. Why is expanding coverage proving so difficult?

Machira: Expanding retirement savings beyond formal employment is the Authority’s single most important priority.

More than 80 per cent of Kenya’s workforce earns a living in the informal economy through agriculture, transport, micro-enterprises and other self-employment activities. Traditional pension products were designed for salaried employees making predictable monthly contributions, making them less suitable for workers with irregular incomes.

Our Strategic Plan 2024-2029 aims to increase pension coverage from 26 per cent to 34 per cent by 2029 through several initiatives.

These include promoting digital micro-pension products that allow contributions through mobile money from as little as KSh20 or KSh50, partnering with SACCOs, boda boda and matatu associations, cooperatives and digital platforms, encouraging flexible savings structures that combine long-term retirement savings with limited emergency access, expanding pension literacy campaigns across the country, and working with government to explore targeted incentives for low-income savers.

The objective is to ensure retirement savings become accessible to every Kenyan who earns an income—not only those in formal employment.

 

Q: Looking ahead, where do you see the biggest opportunities for Kenya’s pension industry?

Machira: Pension funds are uniquely positioned to become major financiers of long-term economic development.

Infrastructure, renewable energy, green bonds and post-retirement medical funds all present significant investment opportunities capable of delivering attractive long-term returns while contributing to national development.

Technology also offers enormous potential. Continued digital transformation will lower administrative costs, improve member services, reduce fraud and make pension saving significantly more accessible.

As the industry grows, we expect diversification beyond traditional fixed-income investments to continue, strengthening both retirement outcomes and Kenya’s capital markets.

 

Q: What are the biggest risks facing the sector?

Machira: Employer default on pension remittances remains one of the most significant threats to members’ retirement outcomes. Cybersecurity risks are becoming increasingly important as pension systems digitise, while climate-related shocks and global market volatility require more sophisticated investment risk management.

Trustees will need to balance capital preservation with prudent diversification while ensuring retirement savings remain protected.

 

Q: Outstanding unremitted pension contributions have reached nearly KSh68 billion. How serious is this problem?

Machira: It is a serious concern.

Employers are legally required to remit pension deductions by the 10th day of the following month. When contributions are deducted but not remitted, workers lose investment income and the benefits of long-term compounding.

As at 31 March 2026, outstanding unremitted pension contributions stood at KSh67.9 billion. Public institutions account for approximately 92 per cent of this amount, with universities, county governments and health institutions among the largest defaulters.

The Authority has strengthened enforcement mechanisms, including empowering trustees to appoint the Kenya Revenue Authority as a collection agent where necessary. Pension deductions belong to employees and should never be used as working capital by employers.

 

Q: Finally, what message would you like every Kenyan worker to take away?

Machira: Treat your retirement statement with the same urgency, scrutiny and frequency as your monthly bank statement.

Don’t wait until retirement to discover missing contributions. Check your pension statement every year. Ensure every deduction appearing on your payslip has been credited to your pension account. If anything is missing, raise the issue immediately with your employer, your scheme trustees or the Retirement Benefits Authority.

Protecting your retirement begins with knowing your pension.