Workers, firms to remit 12pc pay to NSSF

 

NSSF building in Nairobi. Photo/FILE  Nation Media Group

By PAUL WAFULA pwafula@ke.nationmedia.com

In Summary

• The National Social Security Fund Bill, 2012 makes it mandatory for employers to top up their employees’ contributions by a similar amount, bringing the total contributions to 12 per cent of the employee’s gross pay per month.
• This is likely to further push up employer costs and put pressure on disposable incomes of employees.
• Currently the rates of contribution to the National Social Security Fund (NSSF) are capped at Sh400 a month, translating to a contribution of less than 1.2 per cent of national average earnings. 

Employees in the formal sector should prepare to start remitting at least six per cent of their gross pay to the national pension fund if a proposed law is enacted.

The National Social Security Fund Bill, 2012 makes it mandatory for employers to top up their employees’ contributions by a similar amount, bringing the total contributions to 12 per cent of the employee’s gross pay per month. (READ: State officers may begin to contribute to pension fund)

This is likely to further push up employer costs and put pressure on disposable incomes of employees.

Currently the rates of contribution to the National Social Security Fund (NSSF) are capped at Sh400 a month, translating to a contribution of less than 1.2 per cent of national average earnings. 

“The Bill provides for an increase in the level of mandatory contributions in order to ensure adequate benefits,” NSSF chairman Adan Mohamed said on Tuesday.

The increase in contributions will be over five years from the commencement date of the new pension. It will, however, voluntary for self-employed people who may pay a minimum Sh400 a month. 

The Bill, which has the backing of the Central Organisation of Trade Unions provides a window for employers who operate existing retirement benefits arrangements to opt out with the consent of their employees.

“There are just about 350,000 employees who are currently covered by employer schemes out of the millions of Kenyans employed.

"But employers running such schemes will not completely opt out to protect employees after they leave the companies as they will have to pay the minimum statutory contributions,” Mr Mohamed said.

Employees will also see an end to the lump sum payment upon retirement. This means that workers should only expect upto 30 per cent of their total amounts due upon retirement and the remaining spread out between months.

Breaking News US TOP diplomat for Africa Johnnie Carson says the duty of electing Kenyan leaders rests with its people, but 'choices have consequences'. ... HomeNews News Atwoli backs proposed pension plan

Photo | FILE Cotu secretary-general Francis Atwoli.  Nation Media Group

By NATION CORRESPONDENT

In Summary

• Cotu secretary-general Francis Atwoli said that the law proposing workers to contribute a larger amount to the National Social security Fund (NSSF) was long overdue.
• The new scheme would make it mandatory for workers, who do not belong to other pension schemes, to contribute 12 percent of their gross pay to NSSF, in a first tier arrangement.
• The 350,000 Kenyans who belong to an employer pension scheme, will pay at least six percent of their monthly earnings to NSSF, in what the board says is meant to encourage a savings culture among Kenyans.

The Central Organisation of Trade Union’s has backed the proposed Pensions Bill that will see workers contribute 12 percent of their minimum pay to a national pension scheme.

Cotu secretary-general Francis Atwoli said that the law proposing workers to contribute a larger amount to the National Social security Fund (NSSF) was long overdue.

“The Bill is pertinent as it will be responsive to the needs of workers in old age,” he said. (READ: Workers, firms to remit 12pc pay to NSSF)

Mr Atwoli was speaking after meeting NSSF’s board of Trustees, who had been collecting views from the public and stakeholders on the proposed Bill.

Workers in other schemes

The new scheme would make it mandatory for workers, who do not belong to other pension schemes, to contribute 12 percent of their gross pay to NSSF, in a first tier arrangement.

The 350,000 Kenyans who belong to an employer pension scheme, will pay at least six percent of their monthly earnings to NSSF, in what the board says is meant to encourage a savings culture among Kenyans.

Currently, more than one million NSSF contributors, give out Sh400 per month to NSSF, which is too little as it amounts to the contributor getting Sh450,000 lump sum after 30 years of contributing.

NSSF chairman Adan Mohammed, expressing optimism the proposal would work, said the new Bill would transform the national pension scheme from a provident fund to a social security fund.

State ready to buy two prime NSSF assets

 

Anthony Omuya I Nation The two prime buildings that NSSF plans to sell — View Park Towers (left) and Hazina Towers — in Nairobi’s CBD.  NATION MEDIA GROUP

By MWANIKI WAHOME jwahome@ke.nationmedia.com

In Summary

• The properties measure 203,000 square feet for View Park Towers and 95,000 square feet for Hazina Towers.
• The undeveloped plot is estimated at 1.993 acres.
• Earlier advertisement this year reportedly failed to attract good responses.
• Independent valuers estimate value the properties at between Sh14,000 and Sh15,000 per square feet of the total lettable area.
• This translates to between Sh3.5 billion and Sh5 billion for the two buildings

The government has expressed interest in buying two prime properties estimated to be worth Sh5 billion from National Social Security Fund.

The two buildings — Hazina Towers and View Park Towers — are located in Nairobi’s central business district.

NSSF acting managing trustee Tom Odongo said as a result, the workers’ pension scheme had withdrawn an advertisement for the sale to await the government’s action.

“By the time we went for open tendering, we received a letter from the Permanent Secretary for Housing expressing interest in acquiring the properties and, rather than subject them to public process, we gave the government the first priority.” he said.

The two buildings are near the Uhuru Highway-University Way roundabout.

Other property targeted for sale include an undeveloped plot next to the Israel embassy in Nairobi’s prime property area of Upper Hill.

Sale of the property was demanded by the Retirement Benefits Authority in a bid to reduce the property portfolio of the fund to the required 30 per cent.

Mr Odongo said the situation had become urgent at the beginning of the year when stock prices at the Nairobi bourse were low, but things have since improved.

At the time, the company would have scaled down the property portfolio from 29 per cent to 36 per cent.

“The reason we have surpassed this is not our own making. It’s because the shares at the NSE had a dip, which affected the portfolio balance. But we are seeing it going up, which means the property portfolio is going down,” he said.

He said the pension fund had signed a service level agreement with the investment managers to ensure they are within the limit, and received a compliance certificate in October 2011.

RBA misleading Kenyans on NSSF Bill, says COTU

By PETER OBUYA potieno@ke.nationmedia.com

In Summary

• RBA claims that the Bill also lacks stakeholder input as thus should be shelved to allow for further discussions

The Central Organization of Trade Unions (COTU) on Tuesday criticised the Retirement Benefits Authority (RBA) for “misleading” Kenyans following claims by the pensions body that NSSF Bill 2012 should be shelved to allow for more time for discussions.

RBA, which is the regulatory organ in the pensions industry was reported to have poured scorn on the ambitious Bill seeking to transform NSSF from a provident into a pension fund, by urging for caution and more time for discussions.

COTU secretary general Francis Atwoli has however dismissed as misleading further claims by RBA that the Bill also lacks stakeholder input as thus should be shelved to allow for further discussions.

“The RBA should stop playing ping pong games and engaging in reverse gears to such an important Bill that has received overwhelming consultative engagement by social partners throughout its process,” Mr Atwoli said through a statement.

Mr Atwoli claims that RBA was well represented at the taskforce that drafted the Bill and that all the proposals the pensions body wanted to be contained in the bill are included.

The NSSF Bill 2012 that is due to be tabled before parliament this October seeks to transform the country's pension fund, from a provident fund making one-off lump-sum payments, to a pension scheme offering a regular income to retirees.

But RBA are of the view that NSSF should first seek to deal with issues facing it before seeking to transform its operations.

“We need to deal with serious legacy and corporate governance issues facing the NSSF before we can even start to think of changing the law governing its operations, RBA chief executive officer Mr Edward Odundo was quoted as having said.

But Mr Atwoli says that is tantamount to underrating COTU and the Federation of Kenya Employers (FKE) who have the constitutional prerogative of protecting the interest of workers.

“FKE and COTU are the main social partners with claim to NSSF and it beats logic to learn that RBA can reduce itself to the level of a lopsided thinker and peddle rumours to undermine such a Bill,” Mr Atwoli added.

The decision to upscale NSSF is based on the fact that the current lump-sum payments run out quickly and the beneficiaries slides into destitution thus defeats the purpose of assuring income security in old age for which social protection arrangements are intended.

NSS board of trustees chairman Adan Mohamed told the media last week that the Bill is being drafted and will be tabled in Parliament in October for enactment into law.

Mr Mohamed said the Bill seeks an increase in the level of mandatory contributions in order to ensure adequate benefit. It has already won the support of Federation of Kenya Employers.

HomeFeaturesDN2 DN2 ‘I can’t work any more but boss still pays me’

 

Mr Sebastian Mbuta 

In Summary

• Nine years ago, Mr Sebastian Mbuta got a stroke while on duty and has not been able to work since. But his employer, out of compassion, has kept him on the payrollinShare

It all begun with a jerk one early Tuesday. Sebastian Mbuta, a driver at Andy Forwarders, had arrived for work in the wee hours of the morning as usual, feeling fit and ready for the day’s job.

However, on this November 11, 2003, he would later end up in a hospital bed and not be able to work again. Nonetheless, he continues to draw a monthly salary, nine years on, complete with benefits.

His employer still treats him as a worker in the company, and in addition to paying him a salary every month, offers medical cover and grants him access to loans. And when he ‘retires’, he will be paid pension.

It was about 4 a.m on the material day. Mr Mbuta was at a warehouse within the precincts of the Jomo Kenyatta International Airport, preparing his truck to be loaded with cargo.

He had just engaged the reverse gear and stepped onto the accelerator when his limbs suddenly stopped moving. His eyes also gave in.

His assistant, who had been outside directing the truck from behind, realised the unusual movements Sebastian was making and ran to his side.

It was the frantic call to his bosses’ office that might have saved Mr Mbuta. He was rushed to Aga Khan Hospital, where he was diagnosed with stroke and admitted in the ICU.

Although he was fortunate enough to move from ICU to a non-critical condition in three days, he had to remain hospitalised for another one and half months.

After that, his life became marked by trips in and out of the hospital.

For three months every day, Mbuta had to report at the hospital from his Kangundo home. He still could not speak clearly and the right side of his body was paralysed.

Since the incident, Mr Mbuta’s physical functioning was incapacitated. He had to be terminated from work.

Mbuta, now in remission, says that he had never in his wildest dreams imagined that at the untimely age of 48 years, he would be retired or be in the statistic of people with severe health problems and not being able to undertake gainful work.

“Being the only bread winner for my family, I was very worried,” Mr Mbuta says. He is father to two sons, and because his two brothers had died, six other dependants – the children of his deceased brothers – were also under his care.

Despite the comforting feeling that the staggering medical bills had been cleared by his employer, he spent a few gut wrenching nights after it had dawned on him that he would never go back to work.

Mbuta, who still visits the hospital once every month as routine, has not worked since the tragedy nine years ago. But guess what?

His former employer, decided not to stop paying his full monthly salary, and has continued to do so to date as though he is still at work.

During the critical stages of the disease, he was provided with a car and driver that chauffeured him back and forth.

In addition, he still enjoys the benefit of company sponsored medical cover to take care of his medical bills.

Proposed NSSF Bill will not improve retired workers’ welfare

In Summary

• If the National Social Security Fund has not been able to manage the Sh200 workers have been contributing, how will it manage the 12 per cent increment?
• From experience, NSSF has not been able to manage retirees’ benefits well. Many have died before receiving their dues from the social security fund.
• This has made the fund one of the biggest examples of corruption in the government and there is little to show whether this has changed.

The proposed NSSF Bill 2012 to convert workers contribution from the provident fund to a pension scheme is ill-timed and unacceptable since it will be of no value to many Kenyan workers.

The Bill, which also proposes to increase workers’ contributions of Sh200 per month to six per cent of the employee’s monthly pensionable pay plus the employer’s six per cent is unjustified.

If the National Social Security Fund has not been able to manage the Sh200 workers have been contributing, how will it manage the 12 per cent increment?

From experience, NSSF has not been able to manage retirees’ benefits well. Many have died before receiving their dues from the social security fund.

This has made the fund one of the biggest examples of corruption in the government and there is little to show whether this has changed.

This was the reason why most companies had to come up with their own pension schemes to protect their employees pension dues.

The only way for the government to ensure the welfare of its citizens is first to establish a strong welfare schemes for the elderly and unemployed.

Secondly, the government should reduce the rate of taxation on the pension dues or do away with it altogether since this money has already been used in many development projects.

Seek KRA to boost funds collection, NSSF told

 

Finance minister Njeru Githae at the National Social Security Fund's inaugural annual general meeting on September 17, 2012. Photo/DIANA NGILA  NATION MEDIA GROUP

By MWANIKI WAHOME jwahome@ke.nationmedia.com

In Summary

• NSSF asked to reduce on its property portfolio in the country
• NSSF management asked to opt for other investment vehicles like treasury bills, infrastructure bonds and equities

The National Social Security Fund (NSSF) should consider investing in embassies and ambassadorial residences in foreign countries and enlist the services of the Kenya Revenue Authority (KRA) to collect funds to improve its performance.

Finance minister Njeru Githae, however, said the Fund should reduce its property portfolio in Kenya.

“Look at foreign missions and identify those that you can buy. You will already have the first tenant. We are paying too much in rent in foreign missions and residences,” he said.

He said Tanzania had taken similar steps to reduce the amount of money it pays as rent in selected countries.

Annual meeting

Mr Githae was speaking during the first annual general meeting of the National Social Security Fund at Moi International Conference Centre, Kasarani. He represented President Kibaki, who was to be the chief guest.

The minister told the NSSF management to look for other investment vehicles like treasury bills, infrastructure bonds and equities.

“When you look at the accounts you know what went wrong with NSSF. It moved from an investment company to a land-buying company. You should dispose off the plots you have and avoid buying new ones,” he said.

He said that during the Budget speech in June, he directed various corporations to rationalise activities such as revenue collection to avoid duplication and cut on costs.

President Kibaki, in the speech read on his behalf, said NSSF had contributed to development of the country through investing Sh28 billion in treasury bonds and infrastructure bonds last year, particularly in energy sector.

He added that it should partner with power producers to generate more power for the country.

He acknowledged the Funds role in development of housing, particularly a Vision 2030 project that will see 30,000 units constructed at Mavoko municipality.

He told stakeholders to support a Bill that intends to transform NSSF from a provident fund to a pension fund.

The Funds chairman, Mr Adan Mohamed handed Mr Githae his account balance sheet with the Fund, of Sh79,347.

“We need to review the rates, this is too low... after working for 15 years,” he said.

NSSF has already indicated that the contributions will be increased to 12 per cent of one’s salary, six per cent paid by the employer and the other by the worker.

Currently, each member contributes Sh200, regardless of salary level.