NSSF levies to rise tenfold after court reinstates law
The Court of Appeal has allowed a ten-fold increase to Sh2,068 in workers’ monthly contributions to the National Social Security Fund (NSFF) after it ruled that a lower court did not have powers to hear a case challenging the validity of the new rates.
The Court of Appeal has allowed a ten-fold increase to Sh2,068 in workers’ monthly contributions to the National Social Security Fund (NSFF) after it ruled that a lower court did not have powers to hear a case challenging the validity of the new rates.
Justices Hannah Okwengu, Mohamed Warsame and John Mativo have approved the NSSF Act of 2013, saying that it was subjected to public participation as required by the constitution — which demands community input before major decisions are taken.
The higher pension contributions are aimed at helping the NSSF build a bigger retirement pot and offer workers monthly stipends after their retirement as opposed to the current one-off payment.
“Having found, as we did earlier, that the trial court had no jurisdiction to entertain the matter, we find and hold that on this ground, this appeal succeeds,” the judges said.
The judgement offers impetus to President William Ruto’s publicly stated intention to increase workers’ monthly deductions in what he says will afford workers a decent life after retirement.
“We, therefore, set aside the entire judgement dated September 19, 2022, and all the consequential orders. Each party shall bear its own costs for the appeal,” the court said.
The judgement comes barely months after NSSF appealed an Employment court verdict that had blocked its bid to increase workers’ monthly deductions.
The Kenya Tea Growers Association and Agricultural Employers’ Association moved to court to stop the proposed increase, arguing that the law supporting the increment was unconstitutional.
Justices Mathews Nduma, Hellen Wasilwa and Monica Mbaru in a ruling delivered last year quashed the NSSF Act of 2013.
They said the Act was not subjected to public participation in breach of the constitution — which demands community input before major decisions are taken.
The contributions were last reviewed in 2001 when the rate was increased to Sh200 from Sh160.
Raise prospects
Enforcing the NSSF Act 2013 will now raise the prospects of higher workers’ payslip deductions to cater for their retirement benefits.
In the quashed Act, total pension contribution for both the worker and employee was supposed to be a maximum of Sh4,136, being 12 per cent of the proposed maximum pensionable earnings of Sh34,476.
But to ease the burden on the workers, the state decided to stagger the payment over a period of five years, which would see top earners pay more than Sh15,000 monthly with their employers topping an equivalent amount in the fifth year.
In the first year, the government had capped the 12 per cent charge on half the national average monthly income quoted of Sh34,476, which means that the NSSF would recover a maximum of Sh4,136 monthly.
The top earners would pay half the charge at Sh2,068, up from the current Sh200, while the low earners were to part with Sh360 or 12 per cent of the minimum wage.
NSSF maintains that the country’s dependency ratio is too high and that higher savings will help people retire with dignity.
that had been set at Sh6,000 under a graduated scale meant to alleviate poverty among senior citizens.
Workers already signed up for an occupational scheme have been offered relief since they would pay six per cent of the minimum wage or Sh360 in the first year upon receiving approval from the Retirements Benefits Authority—the industry regulator.
This was to 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.
The NSSF maintains that the country’s dependency ratio is too high and that higher savings will help people retire with dignity.
