NAIROBI, Kenya, Sep 17 – The National Social Security Fund (NSSF) held its first Annual General Meeting (AGM) since its formation 47 years ago, ahead of its transformation from a provident fund to a pension scheme.
In a speech read on his behalf by Finance Minister Njeru Githae, President Mwai Kibaki lauded NSSF for taking a bold step to revamp the fund and making a commitment to embrace the principles of transparency and accountability.
The president noted that in the new dispensation and guided by the new Constitution, all public institutions must make a conscious decision to embrace corporate governance excellence.
“The hosting of the NSSF AGM is a truly historical moment as NSSF members can now learn how NSSF manages its funds amounting to Sh110 billion. The fact that NSSF is now investing professionally through Custodians and Fund Managers inspires confidence regarding the management of members’ funds,” he said.
“The government is committed to supporting NSSF achieve her mandate as envisaged at the time of its establishment in 1965,” he emphasised.
As part of its one month rebranding campaign that started early this month, the fund aims to maintain world-class corporate governance standards, adopt cost effective information communication technology solutions and enhance customer service delivery.
NSSF Acting Managing Trustee Tom Odongo reiterated that the fund is currently not bound by law to convene such an AGM, but the new Board of Trustees and Management have prudently seen it fit to move in this direction as part of a wider integrity benchmarks achievement.
“As part of our re-branding exercise, we are sincerely committed to maintain world class corporate governance standards,” he stated.
“The tenets of good corporate governance require that institutional platforms such as AGM’s be employed to keep our stakeholders abreast,” he explained.
The president expressed optimism that NSSF will soon diversify its investments to cover infrastructure Bonds in the energy sector to facilitate power generation and he noted that the Fund is moving in the right direction by planning to partner with the Kenya Revenue Authority (KRA) as its collecting agent to boost the fund’s efficiency.
Githae acknowledged that NSSF is set to embark on a 30,000 housing development project in Mavoko, but he advised them to stop their ventures in real estate and refocus their commitment to helping Kenyans with their investments.
“You are an investment company. I think you now need to stop buying any more plots and dispose of the ones that you have no intention of developing so that members can benefit more,” he said.
“Also, you need to take advantage of the modern technology and find a way where members can, via SMS, know how much they’re contributing and the years their employers never remitted the fund. This will allow members to know what their contributions are, instead of waiting until someone retires to get that information,” he added.
Kibaki acknowledged that the NSSF has continued to make a tremendous contribution to economic development through its more than Sh28 billion investments in Treasury Bonds and noted that the fund is currently well positioned as one of the largest institutional players in the equity markets controlling a total of 10 percent of the Nairobi Securities Exchange (NSE) share value amounting to Sh39 billion.
In recent weeks, NSSF has been actively lobbying various stakeholders to win their support over the proposed NSSF transformation scheduled for parliamentary tabling in coming months.
The fund is set to be converted from a provident fund to a social insurance pension scheme that will make it mandatory for all income earning persons to contribute about 12 percent of their wages to the provider of retirement financial security.
NSSF has already received the backing of both the Federation of Kenya Employers and the Central Organisation of Trade Unions (COTU) in its bid to facilitate a smooth sail for the draft National Social Security Bill 2012, which proposes to change the provident fund into a pension scheme, where at least two-thirds of the final benefit must be paid as pension for the rest of the pensioner’s life – as opposed to the current one-off lump sum cash payment.
Kibaki called upon the stakeholders to actively present their views to facilitate consensus building ahead of its tabling in parliament for debate and passing.
NSSF’s Transformation Bill is consistent with government policy and the tenets of the new Constitution of Kenya (Section 43), which gives every Kenyan a right to social security.
If it sails through, the NSSF Transformation Bill will help mobilise national savings as the rates of contribution to the new pension fund will be at 12 percent of pensionable earnings (basic earnings) split, at a 50:50 ratio, between the employee and employer.
NSSF members will enjoy pension benefits payable under the pension fund such as a retirement and invalidity pension and they will also enjoy a range of benefits including survivors benefit, funeral grants and emigration benefits.
Retirement Benefits Authority (RBA) Head of Compliance David Nyakundi confirmed that the NSSF had complied with the law by providing members with a detailed report of their past financial numbers and by preparing an RBA approved investment policy.
“You have complied with the law in terms of preparing an investment policy. It is important for every scheme to have an investment policy so that investments are properly structured and they’re merged to the needs and profiles of respective pension schemes,” he said.
“NSSF has a current investment policy which RBA has looked at, and we don’t have an issue with that aspect,” he added.
NSSF Chairman Adan Mohamed disclosed that in 2010/2011, NSSF performed well returning a net increase in scheme funds amounting to Sh11.6 billion, while the fund’s net assets also enjoyed growth rising to Sh110.4 billion up from Sh98.6 billion posted the previous year.
“The board of trustees, management and staff remain confident that the growth momentum achieved in the financial year under review will be maintained in the current financial year notwithstanding the prevailing economic climate,” he assured.