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NSSF chairman and his team when they appeared before Parliamentary committee/FILE

Kenya

Kenya ranks poorly in EA pension contributions

NSSF chairman and his team when they appeared before Parliamentary committee/FILE

NSSF chairman and his team when they appeared before Parliamentary committee/FILE

NAIROBI, Kenya, Feb 24 – Kenyans are the lowest contributors to pension schemes in East Africa, with only five percent of the population remitting payments for social security.

This compares poorly to Tanzania, where 20 percent of the population makes social security contributions, Uganda at 15 percent, Rwanda 9.5 percent and Burundi where 8 percent of the population has a pension plan.

Speaking at a forum on the new National Social Security Fund Act 2013, KPMG Tax Manager John Mgonda however said there is hope for Kenya’s improvement in the next five years, following the implementation of the law, which intends to raise pension contributions.

The Act’s implementation is expected to kick off on May 31 this year.

“It will be some time before we become even with Tanzania, Uganda, Rwanda and the rest in terms of contributions that stand higher than ours. Their contributions are based on the growth earning of the employee,” Mgonda said. “This is against ours which will now be based on the higher and the lower earnings limits.”

At the moment close to 10 million Kenyans in the informal sector do not make any form of social security contributions, leaving it to only 2.5 million citizens in the formal sector.

“Interestingly our President the other day launched a programme where the old citizens, persons of 65 years and above, would actually enjoy security of about Sh2,000 a month. This has come a bit late, but they say, it’s never too late,” he noted.

However, apart from the increasing the contributions made by the members, the Act allows NSSF to be transformed from a national provident fund into a pension scheme, a move he says will allow citizens in the informal sector to make their contributions at a minimum of Sh200.

“The New Act is in accordance with Article 43 of the Constitution of Kenya which provides for Social Security Benefit to all Kenyans. It will enhance the saving culture and if well managed will assist most people after retirement,” Mgonda said.

In the new Act, pension contributions will be 12 percent of the set pensionable earnings, with employees remitting six percent and six percent from the employer.

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Meanwhile, KPMG Director of Tax Services Peter Kinuthia called on the government to focus more reforms at NSSF that will see proper management of members’ contributions.

“Kenyans will feel good when the money is well utilised by avoiding issues of corruption and instead investing the funds. We cannot have ‘heavy rains while still have leaking roofs,” Kinuthia said.

The forum was organised by KPMG and UAP Life Insurance, which is a member of UAP Holdings in efforts to create more understanding of the NSSF Act.

“This whole story about NSSF Act is like being in forest or puzzle yet it is pretty simple if we go on with these kinds of forums. I believe that when you are educated as a customer, you are empowered, because you get top understand what you are buying,” UAP Insurance Managing Director James Wambugu noted.

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