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
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