PSC Rejects Claims That New Pension Scheme Created Discriminatory Dual-Pension System

The Public Service Commission (PSC) has rejected claims that Kenya’s transition from the Defined Benefits Scheme to the Defined Contribution Scheme created a discriminatory dual-pension system for public servants.

Appearing before the National Assembly’s Public Petitions Committee to respond to Public Petition No. 8 of 2026, PSC Deputy Chief Executive Officer Gerald Kuhaka said the transition to the Public Service Superannuation Scheme (PSSS) was designed to give eligible public officers a choice on their retirement arrangements.

Kuhaka said the Public Service Superannuation Scheme was established under the Public Service Superannuation Scheme Act and came into effect on January 1, 2021.

He explained that officers aged above 45 years when the scheme commenced were given the option of joining the new contributory scheme or remaining under the existing Defined Benefits Scheme.

According to Kuhaka, officers who opted to remain under the Defined Benefits Scheme did so after exercising their right to make that choice.

The PSC was responding to concerns raised by members of the Kenya National Association of Public Service Pensioners in Kericho, who argued that the existing pension framework had created an unfair dual-pension architecture.

Pensioners raise concerns over benefits

The petitioners also raised concerns over the statutory commutation of one-quarter of pension benefits, arguing that the arrangement reduces retirees’ monthly income despite pension being an accrued right under Section 5 of the Pensions Act, Cap. 189.

They further complained that failure by the National Treasury to conduct periodic actuarial reviews and implement pension increases recommended by the Salaries and Remuneration Commission (SRC) had eroded the purchasing power of pensioners amid rising inflation.

The pensioners also raised concerns over delays in accessing death benefits under Section 17 of the Pensions Act, attributing the delays to what they described as cumbersome administrative procedures.

They subsequently petitioned Parliament to facilitate the amalgamation of all non-contributory civil service pension schemes into a single, unified and sustainable framework.

They also called for an actuarial review of pension schemes and corresponding pension adjustments to cushion retirees against inflation.

The petitioners further sought a comprehensive review of the Pensions Act and the Pensions (Increase) Act.

Government reviewing pension laws

In response, Kuhaka told the Committee that the National Treasury had constituted a Multi-Agency Task Team in 2024 to review pension laws.

The team includes representatives from the PSC, and its work is still ongoing.

“This review is ongoing, and any resulting amendments or repeals will go through the normal legislative process, which is expected to address these concerns,” Kuhaka said.

Principal Secretary for the State Department for Public Service and Human Capital Development, Dr Jane Imbunya, said several factors informed Kenya’s transition to a contributory pension system.

She said the reform was intended to make public pension costs more fiscally sustainable and predictable while shifting funding risks away from future taxpayers.

The reform was also aimed at aligning Kenya’s public service pension arrangements with modern retirement benefits practices, mobilising domestic savings for economic development and giving members greater transparency and ownership of their retirement savings.

PSSF explains difference between schemes

Public Service Superannuation Fund (PSSF) Chief Executive Officer Dr Jonah Aiyabei told the Committee that the Defined Contribution Scheme and Defined Benefits Scheme operate under different legal and statutory frameworks.

He said any proposal to merge the two schemes would require a government policy directive through the National Treasury.

Committee Chairperson and Runyenjes MP Muchangi Karemba sought clarification on how pensioners under the Defined Benefits Scheme are protected against inflation, particularly amid concerns over declining purchasing power.

Aiyabei said the PSSF had adopted an investment policy designed to ensure that returns remain sensitive to inflation while diversifying investments to cushion members against adverse economic conditions.

“We have set an investment policy with a benchmark that every return must be inflation sensitive. So, we endeavor to diversify investments in areas that cover situations so that members don’t get disadvantaged,” Aiyabei said.

He also explained the difference in how retirement benefits are determined under the two systems.

Under the Defined Benefits Scheme, retirement benefits are predetermined using established formulas, while under the Defined Contribution Scheme, the final benefit depends on contributions and investment performance.

“The member bears 100% of the investment risk. With Defined Contributions, I have only defined what I will contribute. What you will take home is upon the professional investment team, so you take the investment risk as a member on the new scheme,” Aiyabei said.