Pension savings with the National Social Security Fund more than doubled in the year ended December 2024.
Pension savings with the National Social Security Fund (NSSF) more than doubled in the year ended December 2024 following implementation of higher mandatory contributions to the statutory scheme.
Contributions to NSSF rose to Sh59.1 billion from Sh25.3 billion in the previous year as the second instalment of the graduated increase in mandatory contributions took effect, according to data from the Retirement Benefits Authority (RBA) released on Wednesday.
Total pension contributions rose 29 per cent to Sh263.4 billion in the year ended December 2024, up from Sh204.9 billion the previous year. This saw the NSSF portion of contributions rise to 22.4 per cent from 10.9 per cent, indicating the statutory scheme is eating into the business of private schemes.
“Total contributions rose significantly in 2024, largely driven by increased employer and member contributions following the implementation of enhanced NSSF rates,” said the Retirement Benefits Authority.
National Social Security Fund Managing Trustee David Koross.
Mandatory pension savings to NSSF were increased starting in 2023 from a flat rate of Sh200, which had been in place for decades, to a new graduated scheme that is pegged on employee salary level.
Last year, the maximum mandatory pension contribution was Sh2,160 based on an upper earning limit of Sh18,000. This year, the maximum contribution rose further to Sh4,320, ensuring more contributions for the statutory scheme.
Increased contributions helped grow funds managed by NSSF to Sh402 billion, which was 18 per cent of the industry total fund value of Sh2.2 trillion. Occupational schemes hold the largest share of pension funds with Sh1.44 trillion under their management.
Employers contributed Sh145.4 billion, while Sh117 billion was deducted from individual payslips. Employers' special contribution was Sh8.7 billion, marking the goodwill of some corporates that pay more for their workers’ old age. Individual workers voluntarily increased their contribution by Sh1 billion, which was, however, lower than the previous year's voluntary contribution.
“While normal contributions from both parties showed strong growth, additional voluntary contributions and medical fund contributions declined, suggesting a shift in focus toward mandatory contributions,” said RBA.
Volume of unremitted contribution increased by 12 per cent, driven largely by short-term delays - of less than 30 days - signaling liquidity problems encountered by some of the employers. The volume of unremitted contributions rose to Sh69.4 billion from Sh61.7 billion, the bulk of which was older than 30 days at Sh55.4 billion.
“Unremitted contributions continued to rise in 2024, driven largely by a sharp increase in amounts due within 30 days, which more than doubled,” said RBA. “While contributions overdue by more than 30 days remained relatively stable, the large number of unremitted amounts highlights ongoing challenges in timely remittance, especially for public sector schemes,” added RBA.
