Make more hay while the sun shines? A glimpse of the NSSF Act

In Issue No. 87 - April 2023, Opinions
April 02, 2023
On February 3, the court approved the full implementation of National Social Security (NSSF) Act no 45 of 2013, after a decade of a tussle in the corridors of justice. This move was part of the social security plan by the Kenya Kwanza government to build a bigger funds pool to finance the affordable housing agenda, which was one of the key pillars of the Kenya Kwanza Manifesto. This will therefore result in citizens under the occupational pension scheme digging deeper into their pockets as employers will be expected to file their first returns on the 9th of April.

The new NSSF rates will be 12% of the pensionable wages contributed equally by both the employer and the employee (each 6%). According to the NSSF Act, the Upper Earning Limit (UEL) is for employees who earn Ksh. 18,000 and above, while the Lower Earning Limit (LEL) is for those who earn below Ksh. 6,000. Employees earning above Ksh. 18,000 will be divided into tier 1 and tier 2. According to the figure below, employees earning between Ksh. 3,000 and Ksh. 6,000 will pay contributions in the Tier 1 category only. In contrast, those in the UEL category will contribute to the Tier 1 and 2 categories.

Tier 2 is calculated as the contribution balance for earnings between Ksh. 6,000 and Ksh. 18,000. Those earning above Ksh. 10,000 will pay in both Tier 1 and Tier 2 categories. This means their computation is calculated as a result of Tier 1 and Tier 2 totals.

Employee EarningsPensionable EarningsTier I Pensionable EarningsTier II Pensionable EarningsTotal Pensionable Contribution Per month

These new rates will see to fruition that the NSSF surge their annual contributions from 16 billion, which is equivalent to 1.2 to 1.3 billion a month, to a projected figure of 27 billion for the fiscal year 2023 to 2024, which is an estimated addition of 7 billion a month.

This move by the court had been a bone of contention as it aroused mixed reactions. The president had earlier this year openly expressed his dissatisfaction with the previous NSSF rates hence spearheading the conversation on changing the rates. The president, Dr William Ruto, noted that ‘we have the lowest saving as a percentage of GDP in our region, it is not possible for us to continue contributing Ksh. 200 and pretending we are doing anything called saving, it is not saving it is a joke’. This was a clear indication of the government’s disapproval of the previous rates especially considering the previous rates with a cap of Ksh. 200 that was enacted in 2001. This is also considering that the purchasing power in 2001 and 2023 is different.

Additionally, The Central Organization of Trade Unions, was also in support of the move by the court as they urged their members to liaise with NSSF to assure them of a secured future in a statement released to the public stating that: 

‘Social Security is a human right that focuses on addressing the universal need for protection against certain life risks and social needs. Many workers have been contributing to and receiving funds from the provident fund which is a lump sum payment for tier 1 leaving them exposed at old age poverty. Kenyan workers will be contributing to and receiving funds from the pension fund under NSSF which is a combination of both provident fund tier I and the pension fund tier II. An employer may opt of tier I for a better scheme. Over and above the lump sum payment received, Kenyan workers will be entitled to monthly benefits’. COTU Secretary General, Francis Atwoli.

However, the court ruling was also met with opposition from the Federation of Kenyan Employers highlighting various concerns. According to FKE, there was no clear roadmap for the operationalization of the Act, for example, it was not clear whether the 6% was supposed to be deducted from basic pay or total earnings. The Federation also wanted the government to allow workers & employers time to reorganize their budgets as the sudden change would have resulted in reduced disposable income for workers and high expenditures for employers. It also added that the new Act has a direct implication on existing clauses on gratuity or any other employment benefits, hence it should be made easy for employers with superior private pension schemes to opt-out. The Federation of Kenyan Employees (FKE) however gave its members the green light to implement the new NSSF reductions after a consensus between them and the NSSF Board of Trustees.

Moreover, it has also been noted that NSSF looks forward to netting the informal economy into contributions through the Haba-haba saving plan that was launched in November 2019. Haba-haba gives members a chance to save a minimum of Ksh. 25 a day, with the option of withdrawing 50% of their contribution after consistently contributing for a minimum of 5 years. Despite having new rates in the formal sector by NSSF, the informal sector is yet to be affected as NSSF aims at drawing more pensioners from the informal sector.

NSSF is also working on a biometric gadget that will identify pensioners hence ramping up and shortening the entire process, amidst concerns from the members of the public on impeding payments.

Gertrude Wachira is currently pursuing her degree in Financial Economics at Strathmore University. Her academic pursuits reflect her passion for multidisciplinary fields such as Economics, Public Policy and Governance. Additionally, she has a keen interest in reporting on business news, further highlighting her commitment to staying up to date with the latest developments in the industry. She can be reached at

Getrude Wachira
/ Published posts: 3

Guest author The Platform Magazine

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