NAIROBI, Kenya — The Supreme Court has declared unconstitutional a provision of the Public Procurement and Asset Disposal Act (PPADA) that required retirement benefits schemes sponsored by public entities to comply with government procurement laws, ruling that workers’ pension savings are private funds held in trust and not public money.
In its judgment delivered on May 15, 2026, the apex court allowed an appeal by the Association of Retirement Benefits Schemes, overturning earlier decisions of the High Court and the Court of Appeal.
The judges held that Section 2(o) of the Public Procurement and Asset Disposal Act is inconsistent with Article 227(1) of the Constitution to the extent that it classifies pension schemes established by public entities as public entities subject to public procurement rules.
Retirement savings are private property
The dispute arose after the enactment of the 2015 procurement law, which expanded the definition of public entities to include pension schemes sponsored by public institutions.
The Association of Retirement Benefits Schemes argued that retirement schemes are private trusts established solely for the benefit of employees and should not be subjected to procurement procedures designed for State organs and public entities.
While both the High Court and the Court of Appeal upheld the provision, finding that the schemes perform public functions, the Supreme Court reached a different conclusion.
“The mere fact that an entity performs functions of public interest or is regulated by the State does not, without more, clothe it with the character of a public entity,” the court held.
The judges found that once employers and employees remit pension contributions into a retirement benefits scheme, those funds cease to be public money and become private savings held in trust exclusively for scheme members.
The court further held that trustees, administrators, custodians and fund managers derive their authority from trust deeds established under the Retirement Benefits Act rather than from the State. They neither perform government functions nor receive funding from the Consolidated Fund.
In a key observation, the judges warned that treating pension contributions as public funds simply because a public employer makes contributions would lead to an illogical outcome.
Accepting that argument, the court said, would imply that an employee’s salary remains public money even after it has been paid to the employee.
Scope of Article 227
The Supreme Court held that Article 227 of the Constitution governs procurement by State organs and public entities using public funds and was never intended to regulate privately held retirement savings.
The judges also faulted the Court of Appeal for concluding that retirement benefits schemes become public entities merely because they are regulated by the Retirement Benefits Authority (RBA).
“The role of regulation or supervision does not change the character of a private enterprise into a public entity contemplated under Article 227 of the Constitution,” the court stated.
Court rebukes Retirement Benefits Authority
The Supreme Court was also critical of the Retirement Benefits Authority after it reversed its position during the appeal.
The regulator had supported the Association’s challenge before the High Court and the Court of Appeal but defended the constitutionality of the impugned provision before the Supreme Court.
The judges described the Authority’s change of position as “surprising” and “appalling,” noting that it had abandoned sworn evidence previously filed in support of the retirement schemes.
Industry implications
The judgment sets aside the decisions of both the High Court and the Court of Appeal and confirms that retirement benefits schemes sponsored by public entities are not public entities for purposes of the Public Procurement and Asset Disposal Act.
The ruling is expected to have significant implications for Kenya’s retirement benefits sector. Trustees of public sector pension schemes will no longer be required to follow government procurement procedures when purchasing goods and services for their members.
The decision is also expected to reduce compliance costs that industry players argued ultimately diminished members’ retirement savings, while reaffirming constitutional protections governing private trust property and the scope of public procurement under Article 227.