Tax on pension contributions and pension payouts
Kenya Revenue Authority / Retirement Benefits Authority · sources read 4 Oct 2026
What you pay into a registered pension scheme is tax-free up to KSh 30,000 a month; anything above that is taxed. When you take money out, the scheme deducts tax of between 10% and 30%, and that tax is final.
- Where
- Through your employer's payroll (PAYE) and your pension scheme's administrator; KRA questions on iTax or at a KRA Tax Service Office
What you need
- Proof of your pension contributions, given to your employer so it is applied in your PAYE
Steps
- Tell your employer about your pension contributions and hand over the documents. Your employer must deduct them (within the limit) before working out your PAYE.
- Check your payslip: pension contributions are deducted from taxable pay only up to KSh 30,000 a month (KSh 360,000 a year).
- When you withdraw your savings, expect the scheme to deduct tax at 10% to 30% before paying you.
Watch out
- If your employer pays more than KSh 30,000 a month into a pension for you, the extra counts as a taxable benefit.
- Tax deducted on a pension payout is a final tax, so you don't pay more on it when you file your return.
- Gratuity your employer pays into a registered pension scheme is not taxed up to KSh 360,000 for each year of service.
Who this covers
- Members of a registered pension or provident fund, or a registered individual retirement fund.
Official sources (5)
- Amendments to PAYE Computation Pursuant to the Tax Laws (Amendment) Act, 2024 (public notice, 19/12/2024) kra.go.ke · read 4 Oct 2026
- PAYE (File & Pay) kra.go.ke · read 4 Oct 2026
- Guidance on Employer Obligations in Applying Income Tax Deductions, Reliefs and Exemptions (public notice, 06/10/2025) kra.go.ke · read 4 Oct 2026
- Withholding Tax (individual) kra.go.ke · read 4 Oct 2026
- iTax portal itax.kra.go.ke · read 4 Oct 2026