The Central Organisation of Trade Unions (Cotu) has reiterated its support for higher contributions to the National Social Security Fund (NSSF), saying it would be in the best interest of workers.
The umbrella union said the higher contributions would improve the financial muscle of Kenyan workers upon retirement.
“Consequently, the move to effective immediately implement the NSSF Act, 2013 is welcomed considering it makes it mandatory for employers to ensure that workers have a provident fund and a pension scheme...many workers have only been contributing to and receiving funds from the provident fund, which is a lump sum payment that workers have been receiving at a go (Tier I). After receiving the lump sum from the provident fund, Kenyan workers have been left exposed to old age poverty with no social security covering them,” Cotu said.
The union, however, called for reforms to seal any potential loopholes for graft at the NSSF.
“But much more importantly, Cotu would like to call upon the NSSF Board of Trustees to appoint a very competent Managing Trustee/CEO who will live above corrupt persuasion,” Cotu Secretary-General Francis Atwoli said in a statement.
The workers’ union noted that with the new system, workers will be able to access part of their pension as a one-off payment after retirement while they receive the rest in monthly payments.
NSSF classifies workers under Tier 1 as those earning salaries below Sh18,000 while those earning above this are classified under Tier 2.
NSSF says the deductions have been set based on an initial lower limit of Sh6,000 and maximum Sh18,000. These limits will however be reviewed on a gradual basis from next year until they matched the current minimum wage.
Based on the arrangement, the lowest pension contribution this year will be Sh720 per employee for those earning Sh6,000 monthly. Each employee will contribute Sh360 to the NSSF with an employer matching the amount into a Tier 1 account.
Employees earning above Sh6,000 will be deducted above the Sh360 pension contributions. They will be deducted the Sh360 and an additional 6 percent of their salary (less the Sh360) to be deposited at the Tier 2 account. Their employers will also match similar contributions to the accounts.
This applies to employees earning Sh18,000 which has been set as the upper limit.
Employees earning Sh18,000 and above will be deducted a total of Sh1,080, of which Sh360 to the Tier one account and Sh720 to the Tier two account. Employers will match the same amount, to see the total contribution for such an employee being Sh2,160 every month.
Employers can, however, decide to maintain Tier two contributions at alternative funds that are better than NSSF, but the Sh720 under Tier one must be maintained by NSSF.
Upon retirement, a worker will be able to access about a third of their pension as a one-off payment, while the rest will be paid monthly, a move the workers’ union has welcomed.
“Moving forward, Kenyan workers will be contributing to and receiving funds from the pension fund under the NSSF which is a combination of both the provident fund (Tier I) and the pension fund (Tier II). Noteworthy, the NSSF Act provides that an employer may opt out of Tier II, as provided by the NSSF, for a better scheme. This means that over and above the lump sum payment received at a go, upon retirement or as provided by the NSSF Act, 2013, Kenyan workers will be entitled to monthly benefits, upon retirement, as they would have respectively contributed under the Tier II,” Cotu stated.
The Federation of Kenya Employers (FKE) had on Wednesday argued that raising the rates would affect employers’ payroll costs and reduce workers’ take-home pay.
