Many employer-backed pension schemes, which had contributions above the required minimum six percent of members’ pensionable pay, are lowering the rates to shield themselves from the pressure of the newly enhanced National Social Security Fund (NSSF) deductions.
Mandatory employer and employee tier contributions to the NSSF rose to a maximum of Sh4,320 each in February 2025 from the previous Sh2,160.
The figure will keep rising until it hits a minimum of 12 percent of pensionable pay—split equally between employers and employees—in line with the NSSF Act 2013.
The Retirement Benefits Authority (RBA) said many private schemes are reacting to the increased NSSF rates by revising their by-laws to accommodate the higher compulsory contributions without bursting their current threshold.
This marks a departure from the earlier practice where the schemes’ contributions were running parallel with those of NSSF.
For instance, schemes where employers and employees were each contributing 7.5 percent of pensionable pay are adjusting the figure to ensure that the contribution to the scheme and NSSF matches the 7.5 percent.
“As much as some employers would have wanted the enhanced NSSF contribution to be an additional benefit to their workers besides what is in the private scheme, they are afraid that it may end up being too expensive,” said Julie Oloo, a senior supervisory officer at RBA in an interview.
“So employers are applying for a revision of their bylaws so that if for instance, they were making 10 percent towards the private pension, their total contribution is shared between the scheme and NSSF within the 10 percent.”
Kennedy Keli, General Manager for Pensions at Liaison Group, said while employers who were remitting above the required minimum of six percent are absorbing NSSF deductions within their threshold, those that were below six percent have been forced to start increasing.
“Many employers are accommodating the NSSF contributions within the previous rates they had. If a scheme had say six percent, they are accommodating NSSF within it. Those who were below six percent are the ones that are making upward adjustments,” said Mr Keli.
The move is aimed at ensuring employers do not end up with a pension contribution burden they cannot sustain—a scenario that can fuel non-remittances.
RBA data shows unremitted pension contributions rose by 12.3 percent to Sh47.16 billion in the year ended June 2024.
Ms Oloo said they have been engaging employers to ensure those who had set ‘too ambitious” contributions are allowed to adjust to match the reality to avoid a further pile-up.
The enhanced NSSF contributions have come alongside other deductions such as housing levy and higher contributions to fund healthcare, reducing the take-home pay of the salaried people.
