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Pension funds want SMEs exempted from NSSF rule
Retirement Benefits Authority CEO Charles Machira speaks during the Association of Retirement Benefits Schemes (ARBS) meeting where stakeholders discussed the future of Kenya’s retirement benefits sector at Radisson Blu Hotel, Nairobi Upper Hill on March 14, 2025.
Photo credit: Wilfred Nyangaresi | Nation Media Group
Pension schemes want small and medium enterprises (SMEs) exempted from approvals by the Retirement Benefits Authority (RBA) when seeking to move contributions out of the National Social Security Fund (NSSF) into private schemes.
Employers currently require the regulator’s nod to shift the higher deductions known as tier II from the State-backed NSSF.
The Association of Retirement Benefits Schemes (ARBS) says employers covered by SMEs have faced a lengthy and costly process in getting the regulator’s green light for contracting out.
Employers without the nod to shift the higher NSSF contributions but with their occupational pension schemes have been forced to make higher deductions to the State-backed fund along with their employees.
“The process of compliance should not be cumbersome. The SMEs actually want to contribute but the process is you have to apply to RBA to get approval to remit tier II contributions to an approved pension scheme,” said Enwealth Financial Services Limited chief executive Simon Wafubwa.
“The documentation required is so cumbersome and a hindrance to compliance. We are recommending that since pension schemes have already been approved to receive tier II contributions, the SMEs should not be required to apply and should just contract with approved schemes.”
Employers have been allowed to offset part of NSSF contributions with deductions made to private occupational schemes, absorbing costs faced by the business owner and employees.
With most occupational pension schemes already pooling contributions of at least 7.5 percent by the employer and employee, the higher NSSF deductions have been more than covered resulting in unchanged business expenses and employee statutory deductions to the fund.
The push to waive the requirement of the RBA approval for SME employers comes amid a drive by pension schemes to receive the nod of the regulator to manage the higher deductions on behalf of the NSSF.
As of mid-March, only 38 percent of Kenya’s 1032 pension schemes had the regulatory nod.
The RBA, however, says it has since expedited pending approvals for both pension schemes to receive NSSF contributions on behalf of the fund and for employers to contract out their tier II contributions.
Higher NSSF contributions have now entered their third year of implementation where the top member deduction is set at Sh4,320.
A minimum of Sh480 must be remitted to the NSSF while Sh3,840 can be channelled to an approved private pension scheme.
