Bill allows workers to transfer benefits from EAC nations

Politics and policy Kenya

Workers at the export processing zone in Athi River. The National Social Security Pension Trust Bill 2012 proposes to transform the fund into a pension scheme to offer workers more benefits. 

Photo/File  Nation Media Group

By MUGAMBI MUTEGI

Posted  Tuesday, September 4  2012 at  19:30

In Summary

• Portability of social security contributions is part of the proposed changes in the National Social Security Pension Trust Bill 2012. If passed, the Bill will raise monthly membership contributions to sustain a wider range of benefits.
• The Bill proposes that power be vested in the NSSF board to enter into agreements with its peers in Uganda, Tanzania, Burundi and Rwanda that would allow Kenyans to register and save with their institutions as they work in these countries.
• Where an employer seconds or transfers an employee to another country, they will be expected to continue remitting their share of the monthly contributions as well as that of the employee in the country of origin.
• The proposed increase of contributions by Kenyan workers to six per cent of a gross salary and set at four times the national average monthly wage – should move Kenya closer to its EAC counterparts.
• The list of new benefits proposed in the Bill include a maternity grant of Sh10,000 per child but the duration between births and the maximum number of births per member have yet to be agreed upon. Surviving members of a contributor’s family will also get a Sh10,000 funeral grant or four times the amount they are currently entitled to. hare

Kenyans working in East Africa Community (EAC) member states will be allowed to transfer their social security savings back home upon returning, if Parliament passes a Bill that also seeks to transform the National Social Security Fund (NSSF) into a pension fund.

Portability of social security contributions is part of the proposed changes in the National Social Security Pension Trust Bill 2012. If passed, the Bill will raise monthly membership contributions to sustain a wider range of benefits.

The Bill proposes that power be vested in the NSSF board to enter into agreements with its peers in Uganda, Tanzania, Burundi and Rwanda that would allow Kenyans to register and save with their institutions as they work in these countries.

When a worker decides to move back to Kenya, reaches retirement age or dies, one’s savings held by the institutions will be immediately credited into their NSSF accounts. Section 64 (d) of the Bill states: “Where an employee decides to return to Kenya, the exportability of the benefits of the member as at the date of that decision takes place.”

NSSF acting managing trustee Tom Odongo said that the new policy had been made possible through negotiations held under the umbrella East and Central Africa Social Security Association.

“The fund managers from the EAC countries have committed to ensuring that members from whichever country can request to transfer their savings between countries if and when the need arises,” said Mr Odongo. “This will be highly beneficial to workers because it eases the trouble of relocating by shielding the workers from loss of savings when they do so.”

Where an employer seconds or transfers an employee to another country, they will be expected to continue remitting their share of the monthly contributions as well as that of the employee in the country of origin.

The association’s members are expected to meet in November to finalise the discussions but the East African states are also said to have made another key agreement that the voluntary retirement age be set at 50 and the compulsory one at 60.

The move plays into ongoing talks to fast-track the integration project and create an economic bloc with uniform trade tariffs and adopt a single currency. The EAC has been keen on streamlining immigration, citizenship and nationality laws to provide for uniformity in the documents required for travel within the region.

Ministry of EAC Affairs chief economist Richard Sindiga said in Nairobi that transfer of benefits was important but would only bear fruit if the other sectors of the economy are “liberalised”.

“Many people have turned away job offers in neighbouring countries fearing loss of benefits once they relocate,” said Mr Sindiga adding that transfer of contributions should allay such fears. 

Mr Odongo says the pace of negotiation for the new NSSF scheme has been less than impressive but insists that membership portability will go down as one of the positive outcomes of the process that should also support free movement of labour.

However, he said that the higher levels of contributions in other EAC states may repel some emigrants, especially from Kenya where a member pays only Sh200 per month with equal contribution from the employer.

“The higher monthly payments in the neighbouring countries may cause some members to cease contributions but it has to be remembered that we are also planning to raise our monthly contributions so the difference will be lower than it is now,” said Mr Odongo.

In Uganda for instance, an employee remit five per cent of their gross monthly wage while the employer contributes 10 per cent of the gross salary, bringing the total contribution to 15 per cent for each employee.