The cost of public service pensions is set to rise sharply in 2026, raising concerns over the strain on government finances.


Increasing retirements, higher wages, and expanded social protection programmes are expected to push pension obligations to record levels.


The 2026 Budget Policy Statement by the National Treasury highlights that the main driver of the rising pension bill is the growing number of public servants exiting employment.


Retirements are particularly increasing in the education sector, security services, and long-established ministries.


By next year, the number of pensioners on the government payroll is expected to exceed 370,000, up from around 340,000 in 2023, fueling higher monthly payouts and lump-sum gratuities.


“To sustain and strengthen the pension reforms, digitisation, combined with an end-to-end Enterprise Resource Planning (ERP) solution, improves monitoring, reporting, and efficiency. An actuarial valuation of future pension obligations is underway,” Treasury Cabinet Secretary John Mbadi said.


Analysis from the Treasury shows that spending on pensions, gratuities, and interest on loans now accounts for nearly half of ordinary revenue in the consolidated account.


According to the BPS, “Consolidated Fund Services (CFS) is taking about 48.5 per cent of ordinary revenue in the 2025-26 financial year, up from just 16.4 per cent in 2013-14.


Pensions and interest payments tripling their share of revenues to 8.7 per cent and 39.8 per cent from 2013-14 to 2025/26. This trend is expected to remain the same in the 2026-27 fiscal period.”


With a projected revenue of Sh3.32 trillion, Sh1.6 trillion will be absorbed by pension and interest payments, with pensions alone expected to cost Sh278 billion. Records show that 30,155 public servants were projected to retire by June 2024, slightly falling to 28,745 in 2025 and 26,500 in 2026. This is up from Sh207 billion allocated for pensions in 2024-25.


Abdi Shurie, Chair of the National Assembly Public Debt and Privatisation Committee, said pension spending will rise to Sh234.9 billion in 2026, an increase of Sh11.75 billion from Sh223.15 billion in 2024-25. He explained, “The growth is driven by a Sh6.55 billion rise in ordinary pension payments and a Sh7.74 billion increase in commuted pensions.”


Delays in releasing funds and occasional system failures continue to affect retirees.


The Controller of Budget, Margaret Nyakang’o, revealed that of Sh131.92 billion in pensions processed between July 2024 and March 2025, only Sh101.78 billion was paid, leaving many retirees with unpaid claims.


Unlike other expenditures, pension obligations are statutory, requiring the government to pay them even if revenue falls short. The BPS notes that this makes pensions a major source of fiscal pressure during periods of low revenue growth.


Rising costs are also linked to recent wage adjustments in the public service, which increase final pensionable earnings. Treasury analysts estimate that a one per cent wage increase adds billions to long-term pension liabilities.


Inefficiencies in pension administration, including delayed verification and incomplete records, have further raised costs, with interest and legal fees exceeding Sh3 billion in the last five years.


To address these challenges, the government has launched reforms aimed at digitising and streamlining pension management.


“Digitisation and re-engineering of public sector pensions, including the Public Service Superannuation Scheme and non-contributory schemes, are underway to improve monitoring, ensure timely payments, and enhance sustainability,” the BPS confirms.