Agency pushes for NSSF listing of all Kenyans

Money Markets

Retirement Benefits Authority chief executive Edward Odundo at a past press conference. Photo/FILE 

By GEORGE NGIGI, gngigi@ke.nationmedia.com

In Summary

• Retirement Benefits Authority (RBA) seeks to make retirement benefit savings mandatory for all adults above 18.
• The move is aimed to increase the number of persons saving for old age.
• Poor saving for old age has been attributed to unemployment, a dependency culture and financial illiteracy.

Retirement Benefits Authority (RBA) is pushing for all Kenyans to be automatically registered in the statutory pension scheme as they turn 18 and acquire national identification cards in order to increase the number of persons saving for old age.

 

The authority is concerned pension coverage has remained stagnant at 15 per cent of the working population despite the government efforts to widen the contribution bracket. RBA seeks to push the pension coverage to 20 per cent in five years.

“There is a need to encourage automatic enrolment when one becomes an adult and acquires an identification card,” said RBA in its five-year strategy plan.

The coverage has remained stagnant as the enrolment to pension schemes was largely tied to formal jobs’ growth resulting in a lack of penetration.

“It is a common requirement in countries where coverage is above 80 per cent. Once 18 when being given the ID number one gets the NSSF (National Social Security Fund) number and tax number – everything is synchronised,” said RBA chief executive Edward Odundo.

The Kenyan workforce in both formal and informal sectors is about 14 million people, of whom 15 per cent are covered translating to 2.1 million. The informal sector contributes the largest number of jobs at between 10 to 11 million most of whom are not covered.

RBA established a fund dubbed “Mbao Pension Scheme” in 2011 that allows casuals and those in informal employment to save a minimum of Sh20 a day for their old age. The scheme has 55,000 members who have so far saved more than Sh85 million.

READ: Mbao Pension savings double in six months

Increased savings for old age is crucial in killing dependency culture which denies the employed an opportunity to invest as their salaries are drained by handouts.

The savings are also a source of long-term funds that can support government’s infrastructure projects.

Poor saving for old age has been attributed to unemployment, a dependency culture and financial illiteracy. The inaccessibility of pension savings during a rainy day has also put off some people who prefer saving with co-operative societies.

RBA is looking for ways to allow its members to utilise their pensions to access basic amenities such as education and health though.

Currently, a person can use the pension savings as a security for a mortgage loan. If a person stays jobless for more than a year they are also allowed to withdraw part of their savings.

Most of the small and medium-sized business operating in the informal sector have been accused of failing to register employees to contribute to NSSF by putting them perpetually on contract basis.

The new NSSF Act has roped in casual workers, a move that is likely to boost the pension coverage.

Previously locked out of the NSSF-managed provident scheme, casual workers will now be required to contribute six per cent of earnings to the national pension fund regardless of the number of days contracted, and their contributions matched by employers.

NSSF is also working with other State agencies to increase its membership. Through a partnership with the National Health Insurance Fund, the NSSF has enlisted more than 80,000 new contributors since the beginning of the year mainly from security firms.

Old-age savings and insurance have lagged behind uptake of banking services pushing players in the two industries to look for ways of catching up. Insurance penetration is at three per cent while financial inclusion is at 67 per cent.