Big Blow To Standard Chartered Investors as Nairobi Court Upholds Sh30 Billion Pension Payout

In a landmark ruling that delivers a seismic financial blow to Standard Chartered Bank Kenya, the Court of Appeal has dismissed the lender’s challenge against a directive to pay Sh30 billion (approximately $214 million) in recalculated pensions to 629 former employees, some of whom retired nearly five decades ago.

The decision, favoring retirees in a decades-long battle, leaves investors bracing for significant financial repercussions and raises questions about the bank’s fiscal resilience.

A three-judge bench comprising Justices Patrick Kiage, Lydiah Achode, and Weldon Korir upheld rulings by Kenya’s Retirement Benefits Tribunal (RBT) and the High Court, which found the bank and its pension fund trustees liable for recalculating benefits dating to 1975.

The court rejected arguments that the RBT overstepped its jurisdiction, stating, “The learned judge did not err in rejecting the contention that the tribunal acted without jurisdiction.”

The tribunal had ordered Standard Chartered to disclose lump-sum benefits, factor in cost-of-living adjustments, housing allowances, and future increases, and submit to oversight by Kenya’s Retirement Benefits Authority (RBA) within 60 days.

The appellate judges emphasized that tribunals routinely direct trustees to compute benefits lawfully, calling the orders “lawful and consistent with decisional law.”

Decades of Disputes
The case traces back to a 1997 actuarial valuation revealing a Sh1.536 billion surplus in the pension fund. Retirees alleged the surplus was unlawfully refunded to the bank instead of improving member benefits—a condition tied to tax approvals.

They also accused the bank of reducing lump-sum payments after converting the pension scheme to a defined contributory model in 1999, which slashed future benefit accruals.

Pensioners initially sought Sh9 billion in unpaid benefits plus interest and a Sh1.1 billion refund of the surplus, totaling Sh5.79 billion.

However, the tribunal’s recalibration—factoring in decades of inflation and allowances—ballooned the liability to Sh30 billion, a figure the bank warned could cripple its operations.

Legal Wrangling and Investor Fallout

Standard Chartered and its trustees had argued the tribunal unlawfully delegated its adjudicative role by ordering them to recompute benefits.

The Court of Appeal dismissed this, stating trustees were rightly directed to “apply the law properly.”

The bank’s loss in the High Court in October 2023, under Justice John Chigiti, foreshadowed the appellate defeat.

Analysts warn the payout—nearly 60% of the bank’s 2022 net profit (Sh50.3 billion)—could dent shareholder returns, trigger stock volatility, and erode investor confidence.

Standard Chartered’s shares, a key component of the Nairobi Securities Exchange, now face heightened scrutiny.

Broader Implications

The ruling underscores mounting pressure on Kenyan institutions to address historic pension liabilities.

It also sets a precedent for retirees excluded from inflationary adjustments, particularly as living costs soar.

The judges’ dismissal of claims under the Fair Administrative Action Act reinforces tribunals’ authority to enforce compliance.

This case mirrors Standard Chartered’s 34-year legal battle with Manchester Outfitters, highlighting systemic challenges in managing legacy disputes. With appellate avenues exhausted, the bank must now navigate financial and reputational fallout while pensioners—many elderly—finally glimpse redress.

The RBA will oversee the recalculation, with compliance due within 60 days.

The financial sector watches closely, aware this ruling could embolden similar claims against other institutions.