Monthly collections by the National Social Security Fund (NSSF) have grown nearly five times over, reflecting the impact of enhanced contributions from workers in Kenya.
NSSF is now netting an average of Sh6.5 billion a month, up from Sh1.4 billion previously, new disclosures by the Ministry of Labour and Social Protection show. This means that the NSSF now nets a mean of Sh78 billion per year, compared to Sh16.8 billion previously.
The higher deductions, implemented from February last year, are expected to increase the pool of pension monies available to Kenyans upon retirement with the NSSF envisioning to improve the social security of workers in old age.
“The monthly average contributions have increased from Sh1.4 billion to Sh6.5 billion and at the same time, the benefits processing time has reduced from an average of 82 days to an average of 10 days,” the ministry noted.
The fund began implementing the NSSF Act, 2013 in February 2023 following a Court of Appeal Ruling clearing the legislation.
The higher contributions are categorised into two- Tier I contributions which represent pensionable earnings up to the lower earnings limit and Tier II- earnings between the lower earnings limit and the upper earning limit.
The lower earnings limit is set by the Cabinet Secretary in the Ministry of Labour, Social Protection and Services based on the average statutory minimum monthly basic wage for the year.
The upper earnings limit is meanwhile the average wage earnings per employee as published by the Kenya National Bureau of Statistics (KNBS) in the economic survey for the prior year.
The maximum mandatory pension contribution is currently set at Sh2,160 based on an upper earning limit of Sh18,000 while the lower earnings limit is set at Sh6,000 putting the maximum tier I contribution at Sh720.
All tier I contributions must be submitted to the NSSF while employers with occupational schemes can opt out of the tier II contributions by applying to the Retirement Benefits Authority (RBA).
The RBA had cleared 84 private pension schemes to handle the tier II contributions as of June last year including CIC Life Assurance, Octagon Africa, Enwealth Financial Services, Britam, CPF Financial Services, Zimele, and Old Mutual.
Funds held in the NSSF breezed past the Sh400 billion mark in the year ended June 2024 in the backdrop of the higher deductions.
Total investments held by the NSSF increased by Sh73.89 billion between December 2023 and June 2024 to Sh402 billion from Sh328.1 billion previously.
The NSSF internally managed Sh52.5 billion of its funds as of June 2024 with the bulk of assets at Sh348.7 billion being managed by external fund managers including African Alliance Kenya, GenAfrica, and Co-op Trust.
