19 June 2014

Kenya: Employers and NSSF Battle Over Pensions

IMPLEMENTATION of increased monthly pension contributions by end of the month is headed for a battle between employers' and workers' unions against the National Social Security Fund.

The State-run NSSF yesterday directed employers to deduct and remit the enhanced pension rates by July 15.

"The advertisement is silent on the fate of employers already running private pension schemes and this is not acceptable," the Federation of Kenya Employers told a press conference yesterday in Nairobi.

It said it would not advise its members to effect the contributions in absence of rules and regulations governing them.

The enforcement of the NSSF Act 2013 was earlier scheduled for January 10 2014, but was on January 21 deferred to May 31 after FKE successfully asked for more time to comply.

Workers under the new law are required to contribute to the NSSF a minimum of Sh360 and a maximum of Sh1,080 (tier one) during the first year of implementation, with equal contribution from their employers. This is a jump from the prevailing Sh200.

Contributions above this, known as tier two, are to be either paid to the NSSF or to private occupational pension schemes, 60 days after applying to the Retirement Benefits Authority for approval.

While FKE said it has no problem with tier one deductions, it called for tier two contributions to be suspended until next year when employers would have understood the regulations.

Executive director Jacqueline Mugo argued the agreement with Labour Cabinet Secretary Kazungu Kambi for the four-month deferment was on understanding that the rules and regulations be "issued immediately to give employers adequate time to opt out of tier two contributions".

"It appears that the envisaged changes have been hijacked by other agendas and there is some secrecy on the fate of the issues employers wanted addressed..., " the FKE said. "Employers do not see signs of commitment from the government on this."

Minimum contributions under tier one rises from Sh360 to Sh420 in the second year, then to Sh480, Sh540 and Sh600 in the subequent years.

Tier two remittances to private schemes rises from a maximum of Sh720 in the first year to Sh1740, Sh3840, Sh5980 and Sh8040 in subsequent years.


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