Workers could get a monthly pension contribution of a maximum of Sh3,000 a year to the National Social Security Fund (NSSF) from the government towards their pension in new proposals by President William Ruto aimed at encouraging Kenyans to save more in the fund.
Dr Ruto on Thursday said the government will contribute Sh1 against every Sh2 that an employee saves in the fund but capped the saving threshold at Sh6,000 a year to ease the pension burden to the government.
This means a government worker that saves the maximum of Sh6,000 annually in NSSF will get a contribution of Sh3,000 from the government, which will boost their savings.
Maximum of Sh2,400 annually
Employees contribute a minimum of Sh200 to NSSF monthly, which is usually matched by an equal contribution from their employers, translating to a maximum of Sh2,400 annually.
Dr Ruto has complained that savings into the NSSF are insufficient to help retirees in old age and wants to overhaul the pension system to boost national savings.
“There is no retired Kenyan today who is living on their NSSF retirement benefits. The meagre current contribution of Sh200 a month adds up to Sh72,000 over 30 years. There is no rate of return on earth that can grow this into an adequate pension,” said Dr Ruto.
The President said that the low rate of savings has a ripple effect on other sectors, including land fragmentation, which has contributed to food scarcity as Kenyans scramble to buy land as their go-to investment tools.
“We intend to overhaul our social security infrastructure to make it inclusive. To encourage those excluded to save, I will be proposing a national savings drive to encourage those in the informal sector to set up their retirement savings plan,” he said.
Also read: Gachagua and Mudavadi: Clash of roles?
“For every two shillings saved in the scheme, up to a maximum of Sh6,000 a year, the government will contribute one shilling.”
The Head of State said social security, especially the pension system, contributes significantly to the national savings in other countries, but Kenya’s current pension system only serves people in formal employment, excluding the vast majority of working Kenyans.
“Not surprisingly, many Kenyans scramble to provide for themselves by investing in 50 by 100 plots of land, thereby exacerbating the problem of land fragmentation, price inflation, as well as land fraud,” said Dr Ruto.
This comes even as NSSF managers are in the spotlight after an audit revealed multiple uncounted earnings and payments totaling hundreds of millions.
In an expose, Auditor-General Nancy Gathungu said NSSF managers also concealed investment revenue amounting to Sh16.6 million from corporate bonds of a company listed on the Nairobi Securities Exchange. The amount wasn’t entered in the fund’s cashbook.
The audit also flagged anomalies with the NSSF’s bank overdraft which showed an overdrawn cashbook balance amounting to Sh206.9million although this was not updated in the cashbook nor balanced against other entries.