The Retirement Benefits Authority (RBA) has sought to rope in the Kenya Revenue Authority (KRA) in its quest to collect unremitted pension deductions, which hit Sh47.16 billion as of June 2024, according to the regulator’s records.
The retirement industry regulator wants the Retirement Benefits Authority Act to be listed as one of the laws empowering the KRA for the purposes of collecting unremitted deductions.
The proposal currently in the public participation stage, if adopted, will see the RBA Act added to the list of laws whose application is enforceable by the taxman, including the Traffic Act, the Second-Hand Motor Vehicles Purchase Tax Act, the Betting Lotteries and Gaming Act and the Stamp Duty Act.
The RBA says the move will help bring life to existing provisions, which allow KRA to issue agency notices to holders of unremitted pension deductions, including attaching to the bank accounts of the defaulting employer.
“The amendment aims to anchor the collection of unremitted contributions as part of the functions of KRA under the Kenya Revenue Act. The amendment aims to operationalise Section 53B (7) of the Retirement Benefits Act,” said the RBA in the draft proposals.
Unremitted pension contributions rose by 12.3 percent in the year ended June 2024 to 47.16 billion, according to the RBA.
The rise in the unremitted contributions, which threaten the social security of pensioners, was attributed in part to increased non-remittance by public universities and county governments.
The national government has also failed in its remittance duty with the National Treasury, for instance, failing to release Sh23.78 billion for 260,000 retirees in the same review period.
The pile-up in non-remitted pensions comes in an environment characterised by low savings with the pension coverage standing at just 26 percent.
The RBA is now banking on the KRA to unlock the unremitted billions and has further pushed for amendments to provide for a procedure through which the taxman shall collect the contributions on behalf of the schemes.
The RBA, for instance, wants KRA’s Commissioner-General to be allowed to issue agency notices requiring holders of unremitted pension contributions to pay up within 30 days or be held liable for the arrears.
The agency notice issued by the KRA shall specify the date set for the payment of the unremitted pension contributions, including interest and penalties.
Employers will be required to notify the KRA of their inability to pay down the contributions on account of a lack of funds within 14 days of the receipt of the notice.
The taxman shall either cancel or amend the agency notice or reject the notification within another 30 days.
The KRA Commissioner General shall remit funds paid by an employer to the scheme within 30 days of the payment receipt.
