NSSF proposes law to increase contributions

  Kenya news

National Social Security Fund chairman Adan Mohamed (left) chats with Finance minister Robinson Githae during the inaugural NSSF annual general meeting. Photo/DIANA NGILA  NATION MEDIA GROUP

By PAUL WAFULA pwafula@ke.nationmedia.com
Posted  Thursday, October 4  2012 at  22:30

In Summary

• The national provident fund is said to have paid at least Sh1.4 billion to three construction companies for old contracts against which either no work or no complete work was done.
• It is said to have paid Sh662 million to a construction firm for a job to construct 300 houses in Nairobi’s Kitusuru suburb, which was never done.
• There were also claims that NSSF had offloaded three per cent of its shares at the East Africa Portland Cement Company in a questionable manner. The allegations have since been denied by managing director Tom Odongo.
• The firm is also said to have lost Sh1.4 billion placed with the Discount Securities Exchange, a stock brokerage firm.

Contributions to the National Social Security Fund could rise significantly if proposed changes to the law are adopted.

Currently, all employees pay a uniform Sh200 monthly, which is matched by a similar amount from employers. Read (Enhanced pension rates are meant to afford you comfort in retirement)

But the National Social Security Pension Trust Bill 2012 will see members pay 6 per cent of their gross pay matched by a similar amount by their employers.

The increased contribution is to sustain a wider range of benefits, NSSF chairman Adan Mohamed said on Wednesday as he lobbied teachers unions to support the proposed changes.

The new benefits proposed in the Bill include disability pensions where members get a physical or mental disability) and survivors benefit (given to dependants of a deceased member).

Surviving members of a contributor’s family will get a Sh10,000 funeral grant or four times the amount they are currently entitled to.

Members leaving the country permanently will also get an emigration benefit.

NSSF is also considering introducing maternity grants of Sh10,000 per child and unemployment advance.

Mr Mohamed said the proposed law is in line with section 43 of the Constitution which stipulates that all Kenyans are entitled to social security.

However, the changes are likely to bring the fund under closer scrutiny because of the questionable investments it has been accused of in the past.

Equal instalments

Under the scheme, workers will no longer receive a lump sum payment but will be paid 30 per cent of their contributions with the balance coming in equal monthly instalments.

The bill has provided for a window for employers who operate existing retirement benefits arrangements to opt out with the consent of their employees.

Companies will have to apply to opt out of the scheme if they already give employees more than the 12 per cent.

The new law will see the country’s wage bill rise by at least 6 per cent. Workers’ net pay will also fall by an equal percentage though with a promise of better lifestyle in retirement.

The Bill is designed to help the government to fix the ageing population burden.

It will tie up members’ contributions until retirement sealing the loophole that allowed workers to access their own contribution and half the employer’s when they switch jobs or leave employment before attaining the retirement age of 55.

Of the five million Kenyans in formal employment, some 350,000 are covered by employer schemes who could opt out of NSSF.