22 January 2014

Kenya: New NSSF Rates Postponed Till May After FKE's Appeal

WORKERS will start paying new NSSF rates end May and not January after the government allowed for more time for employers and employees to prepare themselves for the change.

The announcement was made yesterday after a meeting between employers and Labour cabinet secretary Kazungu Kambi held at his office.

"In the mean time contributions will be made as per the provisions of the old Act," said a statement signed by the CS.

According to the new National Social Security Fund law signed in December, workers were to pay more to the Fund but unlike the old act whereby all employees paid a flat rate, deductions were graded according to salary scale.

Employee earning above Sh20,000 where pensionable earnings are Sh18,000 the total amount payable as NSSF remittance will be Sh2,160 split into two with half-Sh1080- being paid by the employer and the other half deducted from the employee's salary. Under the previous Act employees paid a Sh200 flat rate.

"It is important that both employers and employees are well prepared for the implementation of the Act to ensure the noble intentions succeed in ensuring that workers enjoy a decent life upon retirement," said FKE executive director Jacqueline Mugo in a statement.

Central Organisation of Trade Unions, which supports the new higher remittances, said it will step up scrutiny on NSSF.

The new rates have stirred mixed reactions with some among the public and the insurance industry-where some players run private pension schemes being skeptical and hence opposing it over concerns on fund management and regulation of the NSSF as it converts from a provident fund into a pension scheme under the new law.

"COTU cannot renege on its support for such a noble idea simply because a few individuals that have access to the NSSF have been perusing all manner of documents to steal money from the Fund," said the workers body.

"We are ready to reign in these individuals using all means at our disposal as people who solely contribute to the NSSF... and ensure the NSSF funds are safe."

Last Thursday, Resolution Insurance boss Peter Nduati expressed his displeasure with the new law adding that it creates a conflict between the Retirement Benefits Authority Act and itself.

"If NSSF wants to play in the market, let them be under RBA regulations," said Nduati on his twitter page.

He argued that as currently constituted, NSSF is playing the role of fund manager, custodian and administrator of the funds thereby creating conflict of interest.

Prior to the enactment of the NSSF Bill, ARBS had raised question issues on governance and regulation of NSSF adding that the should it become law, the new NSSF Act will create an unfair playing field in the market.

Consultants Deloitte Kenya and Alexander Forbes have recently held workshops with various companies to educate them on implementation.

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