How Kenyan retirees will benefit

In a statement on Tuesday, April 29, the State House revealed the Cabinet had approved the bill that will benefit retirees in the public and private sectors.

By removing pension taxes, the government intends to improve the financial stability of retirees, allowing them to enjoy their post-work years without worrying about additional tax deductions on their pension income.

“Retirees will benefit significantly as all gratuity payments, whether in public or private pension schemes, will now be fully tax-exempt, ensuring dignity for Kenya’s senior citizens after retirement,” a statement by the State House, Kenya disclosed.

What bill proposes for judges’ pensions

The bill moves superior court judges away from the general Pensions Act by establishing a specific pension and retirement benefits structure for them.

This acknowledges the special requirements of serving in the judiciary.

If passed, it will ensure financial stability, preserve judicial independence, and be in line with larger public sector pension reforms.

This would lead to the implementation of a defined benefit system for current judges and a defined contribution system for newly appointed judges.

“The new law provides for enhanced retirement benefits, including monthly pensions, gratuities, medical coverage, and diplomatic privileges for retired judges and their spouses, allowing them to retire with dignity after decades of service under strict ethical standards,” the Cabinet despatch explained.

How will PAYE be computed?

At the same time, the bill recommended that employers should apply all relevant tax reliefs and exemptions when calculating employees’ Pay As You Earn (PAYE) taxes.

The State House clarified that the move is intended to guarantee that workers receive all applicable tax reliefs up front to prevent them from seeking refunds from the Kenya Revenue Authority (KRA).

The suggested changes to PAYE computations were prompted by the Cabinet’s discovery of a system in which certain Kenyans had previously inflated tax refund applications to allegedly loot money from public coffers.

According to the Cabinet, the modifications would fortify the government’s determination to build a more resilient and inclusive economy and act as the cornerstone of the Bottom-Up Economic Transformation Agenda (BETA).

Why pensioners could earn more

Earlier, TUKO.co.ke reported that the National Assembly suggested reviewing pensions to reflect increased income taxes, inflation, and rising living expenses.

The Finance and Planning Committee recommended evaluating pension payments every five years.

To alleviate the ongoing backlog in tax refunds to Kenyans, stakeholders also suggested the establishment of a Tax Refund Fund.

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