Workers to pay more to NSSF this month

PHOTO | FILE Labour cabinet secretary Kazungu Kambi. Workers countrywide will start paying increased rates to the National Social Security Fund from end-month when the amended law governing the pension scheme comes into effect.

What you need to know:

  • New rates will be implemented in phases, rising to 6 per cent of salary topped with an equal amount from employer
  • Labour Cabinet Secretary Kazungu Kambi picked January as the commencement date for the revised scheme.
  • According to the Act, both employers and their workers are expected to contribute a total of 12 per cent of the total pensionable fund to the National Social Security Fund with workers contributing six per cent while their employers top up with a similar percentage.

Workers countrywide will start paying increased rates to the National Social Security Fund from end-month when the amended law governing the pension scheme comes into effect.

Labour Cabinet Secretary Kazungu Kambi picked January as the commencement date for the revised scheme.

Under the new rules, employers and their workers will be expected to contribute 1.2 per cent of the scheduled deductions each on their pensionable earnings in the first year beginning end of this month.

On Sunday, Mr Kambi told the Nation that the Kenya Revenue Authority had been tasked to collect the contributions on behalf of NSSF to enhance efficiency and transparency.

“Yes, we are starting the implementation of the new Act this month,” he said. “We have appointed the KRA to take charge of the contributions and for that we expect that it will be easy for the employers to make submissions the same way they do with Pay-As-You-Earn.”

Under the new regime, income earners with total pensionable earnings above Sh18,000 monthly will from the end of this month contribute Sh1,440 to the fund, while the lowest income earners with pensionable earnings of up to 3,000 will pay a total Sh180 in monthly individual contributions.

Employers are expected to pay an equal amount to that contributed by their workers to top up on their workers’ pension, bringing the total deductions for individuals earning up to Sh3,000 to a monthly contributions of Sh360 and those with pensionable income of up to 18,000 to a monthly contribution of Sh2,160.

Those earning less than Sh9,000 per month will be exempted from the new rules.

According to the Act, both employers and their workers are expected to contribute a total of 12 per cent of the total pensionable fund to the National Social Security Fund with workers contributing six per cent while their employers top up with a similar percentage.

“We expect that workers will support this new scheme because it will remove money from the pockets of their employers and save it for them for future use,” he said.

Mr Kambi said massive investment plans have been put in place and that interest from the investments would be paid to the contributors.

But concerns have been raised over the commencement date of January as most employers are yet to communicate or prepare for the new rules.

But Mr Kambi said he would be meeting employers tomorrow to compare notes on the implementation.

In the first year of implementation, workers and their employers will contribute 1.2 per cent of the pensionable income, which will increase to 2.4 per cent in the second year, 3.6 per cent in the third year, 4.8 per cent in the fourth year and six per cent from the fifth year onwards.

“The employee contribution shall be drawn directly from his salary and wages while employers’ contribution shall come directly from the employer,” the NSSF board said in notice circulated at the weekend and also published in the Daily Nation on Monday.

Mr Sundeep Raichura, CEO of the Alexander Forbes Group, the firm consulting for NSSF, said: “Employers and employees who have pension schemes will have the right provided for under the Act to opt out of second tier contributions as long as they do so in writing and have created or are already members of a duly registered pension scheme.”

Private pension schemes that have been operating within their own arrangements are now expected to reorganise themselves to operate within the new formula suggested by the NSSF and deduct contributions within the limit provided for in the Tier 2 deductions only.