Get ready for less salary, as you pay more for your NSSF retirement benefits
Formally employed Kenyans will make monthly contributions of 6 percent of their gross salary, a figure that the employer will match.
Brace yourself for more deductions on your salary slip as the new pension contribution rates to the National Social Security Fund (NSSF) rates become a reality.
The increase in pension deductions come after the Court of Appeal permitted the government to implement a law that raised the National Social Security Fund (NSSF) monthly contributions tenfold.
The NSSF Act No.45 of 2013, has increased the current monthly contributions of KSh200 to KSh2,000. This will provide members the opportunity to enhance their savings, secure their financial future, and retire with dignity. The figures will automatically increase the lump sum a worker collects upon retirement.
The increase in the NSSF monthly contributions was proposed last year. The implementation was however stalled by court cases.
The Act states that formally employed Kenyans will make monthly contributions of 6 percent of their gross salary, a figure that the employer will match.
Currently, both the employee and the employer have each been remitting KSh200 as the mandatory monthly contributions, and formally employed Kenyans pay an equal amount to NSSF, regardless of the pay grade.
With the latest development, total pension contribution for both the worker and employee is supposed to be a maximum of KSh4,136, this being 12 percent of the proposed maximum pensionable income of KSh34,476. To ease the burden on workers, the Act has staggered the payment over a period of five years in what will see top earners pay more than KSh15,000 monthly with their employers topping an equivalent amount in the fifth year. In the first year, the Act has capped the 12 percent charge on half the national average monthly income of KSh34, 476, which implies that the statutory body will recover a maximum of KSh4,136 monthly.
Top earners will pay half the charge at KSh2,068, up from the current KSh200. The lower earners will have to pay KSh360 or 12 percent of the minimum wage that had been set at KSh6,000 under a graduated scale.
The NSSF Board of Trustees Chairman Antony Munyiri in a statement assured NSSF members that the Fund is fully committed to working with all stakeholders to ensure a smooth and seamless implementation of the Act.
“The Fund’s focus remains on providing the highest standard of service and protection for our member’s contributions. I believe that this decision will bring the National Social Security Fund (NSSF) closer to achieving this goal,” said Mr. Munyiri.
The NSSF provides social security benefits to Kenyan citizens, including retirement benefits, survivor benefits, and disability benefits. The Fund is mandatory for workers in formal employment, but those in the informal sector can contribute voluntarily. However, the uptake for those in the informal sector has been slow.