The National Social Security Fund (NSSF) has defended the high monthly pension contributions, noting that employees joining employment today could easily take home a retirement package of Sh20 million should they save for the next 30 years.
Speaking during its seventh annual general meeting held on April 25, the provident fund’s Managing Trustee, David Koross said that empirical studies they had done had shown that workers who continued saving at the current rate of six percent would take “something substantial” in the next 30 years.
“We have done a simulation, and if we continue at this rate, in the next 30 years, those who are joining employment, including those we have recruited at NSSF, will go home with about Sh20 million at the bare minimum,” said Mr Koross.
Following the changes brought by the NSSF Act of 2013, the National Social Security Fund has been implementing a three-tiered increase in contributions that saw the contributions increase five-fold from Sh400 to Sh2,160 in 2023.
These contributions, which are shared equally between employees and employers, doubled to Sh4,320 last year. This year, employees have been contributing Sh4,320 which is matched by employers.
But the “real deal,” according to Mr Koross, is the Sh12,960 contributions that will start to be implemented next year as Kenya seeks to increase the country’s gross savings.
However, the increased contributions have thinned the workers’ payslips, with most of them struggling with a high cost of living.
Mr Koross noted that with the increased rates so far, Kenyans have saved an additional Sh220 billion in the NSSF since the start of higher deductions in February 2023.
The higher contributions that were set off by the implementation of the NSSF Act of 2013 have seen assets held in the fund near the Sh600 billion mark as the State-backed national pension scheme grows faster than initially expected.
The implementation of the NSSF Act, 2013 entered its third phase/year in February when member contributions doubled from a maximum of Sh2,160 to Sh4,320.
Member contributions to the NSSF jumped from a flat rate of Sh200 per month to Sh1,080 in February 2023 before rising to Sh2,160 in February 2024.
Contributions to the fund will, from 2027 be determined by the lower and upper earnings limits as gazetted by the government.
According to data from the Retirement Benefits Authority (RBA), the total net assets held by NSSF as of December 31, 2024, were Sh476.8 billion, translating to a growth of Sh74.8 billion in the second half of last year.
About Sh424.6 billion of the assets were externally managed by three fund managers including Gen Africa Asset Managers, African Alliance Kenya Investment Bank, and Co-op Trust.
“The growth in total funds under management by NSSF, both internally and externally, has been driven by growth in member contributions over the last few years,” RBA said.
