Supreme Court: Pension Schemes Exempt from Public Procurement Law
In a landmark decision that provides long-awaited operational clarity for the retirement benefits sector in Kenya, the Supreme Court has ruled that pension schemes—even those established by public entities—are not public entities themselves and are therefore not subject to the strictures of the Public Procurement and Asset Disposal Act (PPADA).
The Supreme Court final verdict made on Friday May 15, 2026 effectively untangles retirement funds from the rigid bureaucracy of state procurement law, placing them firmly under the exclusive oversight of trust laws and the Retirement Benefits Authority (RBA).
The Core of the Dispute
For years, public sector pension schemes operated under a cloud of regulatory overlap. The point of friction was Section 2 of the PPADA, which historically sought to sweep “a pension fund for a public entity” into the definition of a public body.
The Association of Retirement Benefits Schemes (ARBS) moved to court to the Supreme Court challenge this classification, arguing that:
Private Trust Nature: Pension schemes operate as irrevocable trusts. The funds held within them do not belong to the state or the sponsoring public employer; they belong exclusively to the members (the employees and retirees).
Regulatory Overlap: Subjecting these funds to the Public Procurement Regulatory Authority (PPRA) created an adversarial, dual-regulatory regime with the RBA, causing immense delays in fund management and investment decisions.
While lower courts previously took a restrictive, public-accountability approach—arguing that public pension funds perform a public function under state supervision—the supreme court has now definitively drawn the line between public funds and trust funds.
Key Takeaways from the Supreme Court Ruling
The Apex Court’s judgment centres on legal ownership and fiduciary duty:
| Legal Parameter | Public Entity / Procurement Framework | Member contributions & private investment returns |
| Source of Funds | Public coffers / Exchequer | Retirement Benefits Act (Cap 197) & Trust Deeds |
| Governing Statute | PPADA, 2015 | Retirement Benefits Act (Cap 197) & Trust Deeds |
| Governing Statute | PPADA, 2015 | Maximizing fiduciary investment returns for retirement |
| Operational Mandate | Public service delivery | Maximizing fiduciary investment returns for retirement |
The Legal Reality: Because pension assets are held under an irrevocable trust deed, they do not constitute “public funds.” Therefore, compelling a board of trustees to follow public procurement procedures when hiring fund managers, custodians, or property developers unconstitutionally interferes with their primary fiduciary duty to members.
What This Supreme Court Ruling Means for the Industry
This ruling is a massive operational victory for trustees, sponsors, and fund administrators across the country.
1. Speed and Agility in Investment
Pension fund management requires swift, market-driven decision-making. By removing the requirement to advertise tenders, manage lengthy expression-of-interest cycles, and face potential appeals at the Public Procurement Administrative Review Board (PPARB), schemes can now seize investment opportunities in real-time.
2. Reduced Compliance Costs
Navigating public procurement is an expensive, administratively heavy endeavor. Schemes can now streamline their operational costs, directly translating to better net returns and a healthier bottom line for members’ retirement pots.
3. Clear Regulatory Boundaries
The ruling firmly cements the Retirement Benefits Authority (RBA) as the primary, undisputed supervisor of retirement funds in Kenya. It reinforces the authority of the Retirement Benefits Act as the comprehensive framework for ensuring transparency, governance, and accountability within schemes, without needing to lean on state procurement watchdogs.
Moving forward, while public sector sponsors must still adhere to public laws in their core operations, the independent boards of trustees managing their employee retirement funds can now steer their investment portfolios with the full autonomy that trust law intended. also read: Taxing Retirement Benefits in Kenya: How Tax Laws (Amendment) Act 2024 puts more money in your pocket
