NAIROBI — It is a paradox that defines Kenya’s financial landscape: a mountain of cash sitting in vaults while millions of workers struggle to put a roof over their heads. As of June 2025, the country’s pension industry is managing a staggering Sh2.53 trillion in assets, a record high that signals robust financial health. Yet, for the average contributor watching their payslip shrink every month, the dream of home ownership remains agonizingly out of reach.

The latest data from the Retirement Benefits Authority (RBA) reveals that the industry grew by over 12% in the first half of the year alone. This surge is largely driven by the aggressive implementation of the NSSF Act 2013, which raised contribution limits, and a recovery in investment returns. But while the numbers look good on a spreadsheet, housing experts and policy analysts are asking a critical question: Why is this capital not fixing Kenya’s 2-million-unit housing deficit?

The Sleeping Giant

To put the Sh2.53 trillion figure into perspective, it rivals the national government’s annual revenue targets. It is a war chest capable of transforming the real estate sector. However, the bulk of this money—over 52%—is currently parked in government securities. Trustees prefer lending to the state because it is viewed as a "risk-free" return, ensuring steady growth for retirees' pots.

"We are sitting on a sleeping giant," notes a senior investment analyst in Nairobi. "Pension funds are the only source of long-term capital in the economy that matches the long-term nature of housing. You cannot build 30-year mortgages using short-term bank deposits. You need pension money."

The '40% Rule' Explained

For the Kenyan worker, the disconnect is frustrating. Regulatory changes introduced in recent years, specifically the Retirement Benefits (Mortgage Loans) Regulations, allow members to utilize up to 40% of their accrued benefits (or a maximum of Sh7 million) to secure a mortgage or purchase a residential house.

In theory, this should be a game-changer. A worker with Sh2 million in their pension pot could access Sh800,000 to top up a deposit or buy a plot. However, uptake has been sluggish. The hurdles are structural:

• High Interest Rates: Even with a pension-backed guarantee, commercial mortgage rates often hover between 13% and 18%, pricing out the majority of earners.
• Bureaucracy: The process of accessing these funds involves a labyrinth of approvals between trustees, fund managers, and banks.
• Lack of Supply: There is a severe shortage of decent, affordable units in the Sh1 million to Sh3 million range where most workers fall.

The Tenant Purchase Scheme Solution

Industry players are now pushing for a shift from traditional mortgages to Tenant Purchase Schemes (TPS). Unlike a bank loan, a TPS allows a homebuyer to pay for a house like rent over 15 to 20 years, with the pension fund guaranteeing the payments. This model bypasses the high interest rates of commercial banks.

The Kenya Mortgage Refinance Company (KMRC) is also stepping in to provide liquidity to lenders at single-digit rates, hoping to bring end-user mortgages down to below 10%. "If we can marry the KMRC’s cheap funds with the pension industry’s massive asset base, we can finally crack the affordable housing code," says a housing finance expert.

As the RBA pushes for more diversification, the pressure is on trustees to look beyond government bonds. The future of a dignified retirement in Kenya isn't just about a lump sum check; it is about retiring into a home that is fully paid for.