Why Now?
Two things converged. A 2024 government directive pushed pension schemes to actually set up these funds, after years of them existing mostly on paper. And the tax treatment is genuinely good - contributions up to KES 15,000 a month are tax-relieved, and withdrawals for medical expenses are tax-free too.
“A pension pays your bills. It doesn't pay a hospital.”
- Niloyd Associates Retirement Benefits Practice
How It Works, Simply
Your scheme opens a separate medical fund alongside your normal pension pot. You, your employer, or both contribute - often from around 1% of pensionable earnings. At retirement, it buys health insurance or funds your premiums directly, and some schemes extend coverage to a spouse or dependents.
It's still a small category - under 1% of Kenya's total pension contributions. But it's the fastest-growing one, and government policy rarely reverses once it's in motion. If your scheme already offers a PRMF and you can spare the extra percentage point, it's one of the cheapest forms of protection you'll ever buy. If it doesn't yet, that's worth raising with HR - before you need it, not after.
Key insights
A pension pays your bills. It doesn't pay a hospital.
Kenyan pension schemes put KES 1.86 billion into post-retirement medical funds in 2025, up from KES 249.1 million a year earlier - a 646.9% jump, the fastest growth of any pension category in the country.
The tax treatment is genuinely good
Contributions up to KES 15,000 a month are tax-relieved, and withdrawals for medical expenses are tax-free too - a combination few other savings vehicles offer Kenyan workers.
It's cheap protection, while it's still available
If your scheme already offers a PRMF, the extra percentage point is one of the cheapest forms of protection you'll buy. If it doesn't, raise it with HR before you need it.
Conclusion
A pension pays your bills. It doesn't pay a hospital. If you'd like help assessing whether your scheme's medical fund design is fit for purpose, Niloyd Associates can walk you through it.
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Have a question about this topic? Our advisors are available to discuss specific mandates and regulatory questions.
