The new NSSF Bill enhances the level of mandatory retirement savings to be made by, and on behalf of, an employee. It classifies the contributions made towards retirement savings into various tiers for which each tier has a different treatment. For instance, the first tier must be contributed into the National Social Security Fund (NSSF) while the second tier may be contributed to a private retirement fund if certain requirements are met.
To illustrate, in year 1, the contributions to NSSF will increase from Kshs 400 (Kshs 200 each done by the employer and the employee) to Kshs 720 (Kshs 360 each done by the employer and the employee).
The balance of the 12% of earnings (6% each done by the employer and the employee) may be contributed to a private retirement fund subject to conditions detailed therein.
Thus, there are various options available for an employer seeking a retirement solution. E.g. for an employer with a staff base of 10, setting up one's own retirement fund may not be prudent due to time and cost considerations. It is instead advisable that they consider joining an already existing retirement fund under an umbrella arrangement or under a personal pension plan. They are further encouraged to use a fund that is registered by both the Retirement Benefits Authority and approved by the Kenya Revenue Authority. A list of umbrella funds and personal pension plans registered by the RBA can be found at their website.
Lastly, Alexander Forbes has a wealth of experience in structuring retirement solutions that are customized to suit the needs of an SME – and that between our umbrella fund (the Alexander Forbes Retirement Fund) and our personal pension plan (the Alexander Forbes Vuna Pension Plan), we can find an exciting solution for SME's. We are also pleased to meet with companies and talk further through the changes to the NSSF Act and its impact.
Adapted from Angela Okinda of Alexander Forbes