NSSF nets an extra Sh7bn from enhanced retirement contributions
The Federation of Kenya Employers (FKE) National President Habil Olaka (left) with Federation of Kenya Employers (FKE) Executive Director Jacqueline Mugo and other board members during a press briefing on February 24, 2023. FKE last week claimed that the government is ill-prepared to kick off the so-called Tier Two NSSF contributions.
The National Social Security Fund (NSSF) projects its annual collection to increase by Sh7billion following the newly enhanced contributions from workers and their employers.
The fund targets to collect Sh27 billion representing a 69 per cent jump compared to the collections under the old scheme.
“From February which is when NSSF stated that implementation will begin, we expect to collect an additional Sh7 billion. In the financial year 2023/24, we are projecting this figure to shoot to Sh 27 billion and this presents a good opportunity for the fund to grow” NSSF chairman, Anthony Munyiri said in an interview.
NSSF has this month received the first tranche of enhanced contributions from employers following a February 3,2022 Court of Appeal ruling which reinstated the NSSF Act 2013, ending a seven-year impasse.
The NSSF Act, of 2013 increased salaried employees’ monthly deductions from Sh200 to Sh600 for the lowest earner and from Sh320 to Sh1,080 for top earners under a graduated scale. The upper limits on contributions are to rise every year.
Workers earning above Sh18,000 are divided into two levels of contributions — tier I and tier II. Tier I contributions are for those in respect of pensionable earnings up to the lower earnings limit of Sh6,000.
According to NSSF, workers on occupational schemes must make the new contributions until they are exempted by the industry regulator, the Retirements Benefits Authority (RBA), after which they can seek refunds.
NSSF has 2.7 million members and pays out an average of Sh 4.3 billion in pension benefits annually.
The fund’s managers said it will enforce compliance with the new enhanced contribution scheme that is backed by President William Ruto and multilateral lender, the World Bank.
“Employers are supposed to make their remittance by the 9th of every month. Since the implementation was effective immediately following the February 3,2023 Court of Appeal judgement, we are expecting to see the enhanced contributions being made to the NSSF by March 9th. That is what we expect,” Mr Munyiri said.
Postponement calls
Employers have petitioned the government to postpone the full implementation of a new scheme that allows them to channel their newly raised NSSF contributions into already existing contracted-out schemes.
The Federation of Kenya Employers (FKE) last week claimed that the government is ill-prepared to kick off the so-called Tier Two NSSF contributions.
Under the NSSF Act 2013, employers are allowed to save pension contributions of their employees under the Tier Two category.
Tier two contributions refer to those paid by both employers and employees on top of the basic Sh720 they equally contribute to NSSF (Tier One). All employees contribute to the NSSF (Tier One).
Under the NSSF Act 2013, employers are allowed to save workers’ Tier Two pension contributions at private schemes, which the Retirement Benefits Authority (RBA) must first approve. The law, however, requires that it takes two months between the time of application to approval of the private scheme to administer the pensions.
“We have advised our employers to adjust their level of contributions to match what is required under the new Act but there is a challenge about Tier Two. They can remit Tier One contributions, but for Tier Two contributions for employers who have private pension schemes in particular, there is a challenge and that is where we want social dialogue” FKE executive director Jacqueline Mugo told a media briefing yesterday.
“What do they do? Because they will not have gotten the opt-out approval from RBA and they cannot remit it to NSSF because they want to remit to the private pension scheme, which they can only do once they get the exemption.”
Meanwhile, Mr Munyiri said that targets to either dispose or develop its vast tracts of idle land as it seeks to unlock value for pensioners.
According to its latest filings, NSSF holds undeveloped land valued at Sh10.7 billion. For instance, the fund’s Kenyatta Avenue plots L.R. No: 209/11331,1141 2,12287,12219,12220 are cumulatively valued at Sh 4 billion.
“We hold quite a bit of idle land and we have recently discussed at the board level that we are looking forward to getting out of idle land or at least we develop and add value because it is not in our business to hold idle land. We are looking at developing some luxury apartments and others could be mixed-use developments with affordable housing” he said.
