Workers, firms to remit 12pc pay to NSSF

Employees in the formal sector should prepare to start remitting at least six per cent of their gross pay to the national pension fund if a proposed law is enacted.

The National Social Security Fund Bill, 2012 makes it mandatory for employers to top up their employees’ contributions by a similar amount, bringing the total contributions to 12 per cent of the employee’s gross pay per month. (READ: State officers may begin to contribute to pension fund)

This is likely to further push up employer costs and put pressure on disposable incomes of employees.

Currently the rates of contribution to the National Social Security Fund (NSSF) are capped at Sh400 a month, translating to a contribution of less than 1.2 per cent of national average earnings. 

“The Bill provides for an increase in the level of mandatory contributions in order to ensure adequate benefits,” NSSF chairman Adan Mohamed said on Tuesday.

The increase in contributions will be over five years from the commencement date of the new pension. It will, however, voluntary for self-employed people who may pay a minimum Sh400 a month. 

The Bill, which has the backing of the Central Organisation of Trade Unions provides a window for employers who operate existing retirement benefits arrangements to opt out with the consent of their employees.

“There are just about 350,000 employees who are currently covered by employer schemes out of the millions of Kenyans employed.

"But employers running such schemes will not completely opt out to protect employees after they leave the companies as they will have to pay the minimum statutory contributions,” Mr Mohamed said.

Employees will also see an end to the lump sum payment upon retirement. This means that workers should only expect upto 30 per cent of their total amounts due upon retirement and the remaining spread out between months.