The National Social Security Fund (NSSF) in Kenya introduced new contribution rates under the NSSF Act No. 45 of 2013.
The maximum contribution payable under the Act by both employers and employees for the first year is KES 2,160, divided into Tier I Contribution of KES 720, and Tier II Contribution of KES 1,440.
The contributions are based on a Lower Earnings Limit of KES 6,000 and an Upper Earnings Limit of KES 18,000 in the first year. All employees earning less than KES 18,000 per month will contribute a lower amount.
| Year | Lower Earning Limit | Upper Earnings Limit |
| 1 | 6000 | 50% of the National Average Earnings |
| 2 | 7000 | 1 times the National Average Earnings |
| 3 | 8000 | 2 times the National Average Earnings |
| 4 | 9000 | 3 times the National Average Earnings |
| 5 | Statutory minimum monthly basic pay for the top urban centres, second-tier urban centres, and rural areas for the year gazetted by the CS | 4 times National Average Earnings |
Source: NSSF Act N0.45 of 2023
The Act also allows employers to opt out of the NSSF Pension Fund in relation to Tier II Contributions if they participate in, or choose to form or participate in, an alternative pension scheme where they pay Tier II Contributions on behalf of all or a portion of their employees.
This means that the employer can remit Tier II contributions to a separate scheme instead of remitting these to the NSSF. However, the employer is not exempt from making Tier II contributions.
To contract out of Tier II contributions, employers must meet several conditions including notifying the Authority in writing of its intention to opt out at least sixty days before opting to out.
The contracted-out scheme can be an occupational retirement benefits scheme, an umbrella retirement benefits scheme, or an individual retirement benefits scheme. All these schemes should have a reference certificate to prove that they are qualified as contracted-out schemes.
These changes aim to broaden NSSF’s benefit coverage, improve benefit adequacy, and strengthen NSSF’s corporate governance.
New Rates under the NSSF Act N0. 45 of 2013 (Tier I and Tier II Contributions)
Origins of New NSSF Kenya Rates
The National Social Security Fund (NSSF) in Kenya, established in 1965, has undergone significant evolution. Initially operating as a department under the Ministry of Labor, it became a state corporation managed by a Board of Trustees in 1987.
The NSSF was created as a mandatory national scheme to provide basic financial security benefits upon retirement.
In 2013, the NSSF Act No.45 was introduced to address concerns about the adequacy of the framework and contributions for ensuring retirees’ financial security.
However, the Act was suspended in the same year it was enacted.
The Act aimed to broaden NSSF’s benefit coverage, improve benefit adequacy, include self-employed individuals under its coverage, allow full opt-out at Tier II level of contributions for employers contributing to pension schemes approved by the Retirement Benefits Authority, and strengthen NSSF’s corporate governance.
In September 2022, the Act was revived but declared unconstitutional due to several reasons including its impact on county governments and violation of citizens’ rights.
However, an appeal in February 2023 overturned this ruling, stating that the Labour Court lacked jurisdiction over the case and that Senate involvement was not required in passing the Act.
The ruling led to the repeal of the previous NSSF Act (Cap 258) and introduced a new Pension Fund and Provident Fund to replace the previous Provident Fund.
The new provision of a pension fund offers retirees a sense of security with regular payments at retirement, reducing the risk of spending all retirement savings at once.
