Disquiet over NSSF rates as Council of Governors issue new directives

Engineers mount NSSF signage at the headquarters in Upper Hill. [File, Standard] Governors have been directed to disregard the contentious contributions to the National Social Security Fund (NSSF) in the latest showdown between the county chiefs and the fund. The directive contained in a letter dated January 29, 2025, from the Council of Governors, comes as employees expect further dents in their pay slips as NSSF affects the third phase of the enhanced deductions as contained in the NSSF Act, 2013. Additionally, the National Treasury is yet to provide a way forward concerning the deductions as promised by Cabinet Secretary John Mbadi in November 2024. The CS had hinted that the law will be reviewed as private pension administrators complained that the enhanced deductions were slowly edging them out of business. But as the sector is awaiting possible direction from the National Treasury, CoG has written to all county chiefs directing them not to comply with the deductions in a fight that seems to stem from the fund's refusal to allow exemption from tier II contributions. READ: NSSF basket grows to Sh43b on higher contribution rates The NSSF Act, 2013 provides for two levels of contributions - Tier I and II - with employers who have a scheme allowed to opt out of the latter. However, a letter seen by The Standard shows that NSSF refused to grant CoG this option which has reignited the long fight on the validity of the Act that does not sit well with a majority of employers and employees. The letter authored by CoG chief executive Mary Mwiti states that NSSF issues conditions for the Tier II opt-out option to be considered one of them being settling all the outstanding debts and obligations owed to the fund. "The refusal by NSSF to grant County Governments exemption from making the NSSF deductions is, in our view, baseless in law and therefore unlawful," said Mwiti. She went ahead to list the Employment and Labour Relations Court Petition that involved the Kenya Tea Growers Association and the Office of the Attorney General later declared the NSSF Act, 2013 unconstitutional. This was further reinforced by the Supreme Court decision that reinstated the ELRC decision. "The NSSF Act 2013 remains unconstitutional because of the decision of the Court and therefore, the basis of determining contribution rates can only be legally determined under the National Social Security Fund, Act Cap 258," reads the letter. Mwiti tells governors that no contributions ought to be made by any county government based on a law that has been declared unconstitutional, null and void. She said the law gives NSSF a monopoly in the provision of pension and social security, an issue that private pension administrators have also raised. "Counties should remit to NSSF the correct contribution rates under the NSSF Act, Cap 258 of 1965 as per the schedule hereto," Mwiti adds. The NSSF Act, 2013 enhanced contributions from the long-standing Sh200 per employee matched by the employer to the current Sh2,160. However, more deductions are expected this February with those in the high-income bracket having their pay slips slashed by Sh4,320. But as NSSF rates increase, employers who have their own schemes are feeling the pressure with murmurs in the pension sector on what will become of private pension funds. CPF Group managing director Hosea Kili detailed this challenge in November 2024 during the launch of the firm's new product, Taifa Pension Fund, saying many employers are abandoning their superior schemes due to the amounts NSSF is taking. He said some employers previously contributed as much as 25 per cent, combined employer and employee, to their retirement schemes, offering their employees meaningful retirement security. ALSO READ: How new NSSF rates could affect private pension schemes "However, with the introduction of a mandated 12 per cent contribution to NSSF, many employers are being forced to abandon these superior schemes in favour of compliance," Kili said. CS Mbadi, who was the chief guest at the event revealed that the government is reviewing this provision, but did not specify how long it would take. "Our endeavour is to create a level playing field in which small and large pension players thrive. In doing so, we need to work together to resolve outstanding industry issues including bottlenecks in the implementation of the NSSF Act of 2013," said the CS. "Employers have raised various concerns about the risk they have the Act poses to the industry, particularly the private sector pension fund. "I wish to assure you that the government is committed to addressing these issues to safeguard the operations of all pension funds and give employees the most favourable pension benefits," he said.

Disquiet over NSSF rates as Council of Governors issue new directives

Get Full Access for Ksh299/Week.

Stand With Bold Journalism.
Stand With The Standard.

Related Topics

Popular this week

Latest Stories

The Standard Insider

Digger Classified

GET OUR NEWSLETTER

CONNECT WITH US

FOR THE LATEST JOB ADVERTS

DIGGER JOBS

Digger Motors

Digger Real Estate

Disquiet over NSSF rates as Council of Governors issue new directives

Get Full Access for Ksh299/Week.

Stand With Bold Journalism. Stand With The Standard.

Related Topics

Trending Now

Popular this week

Latest Stories

The Standard Insider

Digger Classified

GET OUR NEWSLETTER

CONNECT WITH US

FOR THE LATEST JOB ADVERTS

Stand With Bold Journalism.
Stand With The Standard.