Home ECONOMY NSSF monthly contributions to rise 5 times in July

NSSF monthly contributions to rise 5 times in July

by biasharadigest
Economy

NSSF monthly contributions to rise 5 times in July

National Social Security Fund
National Social Security Fund (NSFF) headquarters. FILE PHOTO | NMG 

Monthly contributions to the National Social Security Fund (NSFF) will increase five-fold up to Sh1, 080 from July 1 as the Treasury joined out-of-court talks with workers’ unions to resolve a dispute over the retirement deductions.

The stalled NSSF Act 2013 that introduced the changes had also sought to raise monthly contributions from employers to match each employee’s deductions, which have remained at Sh200 monthly.

NSSF managing trustee Anthony Omerikwa said Tuesday that the Treasury was now part of the talks with the Central Organisation of Trade Unions (Cotu) and the Federation of Kenya Employers (FKE). He said the discussions are set to be completed before end of the financial year in June.

The higher pension contributions are aimed at helping NSSF build a bigger retirement pot that will empower the fund to offer workers monthly stipends after their retirement as opposed to the current one-off payment.

“We have had a very vibrant and promising consultative meeting yesterday (Monday) with Treasury CS (Ukur Yatani) and certain promises were made. It will only be a matter of few weeks,” said Mr Omerikwa said in an interview with the Business Daily Tuesday.

advertisement


“We are solving the matter in an alternative dispute resolutions approach to unlock the Act. Both Cotu and FKE are positive about it though we are yet to get their actual final submissions. I think before the beginning of the next financial year in July, we will have sorted the issue.”

The contributions were last reviewed in 2001 when the payment rate was increased to Sh200 from Sh160 and it points to a higher pay-slip deduction to cater for social services since the National Hospital Insurance Fund is angling for a higher rate.

If implemented, the stalled NSSF Act 2013 will see workers compelled to save more for retirement while employers will face increased compliance costs. In the stalled Act, total pension contribution for both the worker and employee was supposed to be Sh2,160, being 12 percent of proposed maximum pensionable earnings of Sh18,000.

But to ease the burden on the workers, the State decided to stagger the payment over a period of five years in what would see top earners pay more than Sh10,000 monthly with their employers topping an equivalent amount in the fifth year.

In the first year, the government had capped the 12 percent charge on half the national average monthly income quoted of Sh36,000 , which means that NSSF will recover a maximum of Sh2,160 monthly.

The top earners will pay half the charge at Sh1,080, up from the current Sh200, while the low earning Kenyans will be deducted Sh360 or 12 percent of the minimum wage that had been set at Sh6,000 under a graduated scale meant to alleviate poverty among senior citizens.

Workers already signed up to an occupational scheme have been offered a relief since they will pay six percent of the minimum wage or Sh360 in the first year upon receiving approval from the Retirements Benefits Authority—the industry regulator.

This will increase to Sh540 in the fifth year in a balance meant to cushion company sponsored schemes from collapse since it was feared that most employers would discontinue occupation schemes and opt for the statutory fund.

Mr Omerikwa, who was confirmed as managing trustee in November last year, said the country’s dependency ratio is too high and higher savings will help people retire in dignity. “The current level of savings has left many retirees exposed. It is unfortunate that it is only when they hit retirement age that they realise how much exposed they are,” he said.

Related Posts

Leave a Comment