How new NSSF rates will affect the future of private pension schemes – Minet Kenya GM – Capital Business
NAIROBI, Kenya, March 24 – The implementation of the National Social Security Fund (NSSF) Act, 2013 is expected to have a significant impact on the local pensions industry. The new law is set to unlock billions of shillings under tier II contributions which have been opened to other pension funds apart from NSSF.
In the new law, an employer can choose to send second-tier NSSF contributions to a private scheme after remitting tier-one deductions to the state-owned fund.
In an interview with Capital Business, Minet Kenya General Manager Pensions Division Daniel Mainga speaks on how the new law is expected to affect the future of private pension schemes.
How is the implementation of the National Social Security Fund (NSSF) Act, 2013 expected to transform the local pensions industry?
There is the expectation of faster growth in the pension industry due to the newly increased contribution rates. Hopefully, retirees would have a better pension at retirement.
Do you think employers will change terms of employment, for example salaries, to accommodate the new changes?
There is a possibility of some employers changing employment terms to state any statutory pension deduction will be inclusive of employees’ contribution rate, especially where employers already have existing registered occupational schemes.
What opportunities do you foresee emerging for the pension sector as a whole?
Increased retirees benefits, growth of the pension sector since employers without pension arrangements will now contribute higher rates to the NSSF or privately established occupational schemes.
In your opinion, will these new rates encourage Kenyans to cultivate a good savings culture?
Participants of the fund will be encouraged to save more if the returns are reasonable. Kenyans would also be encouraged to increase savings once they start seeing retirees living better due to improved pension packages. Increased savings would also be achieved if the larger population is well sensitized on the pros of saving for the future.
Are there any missed opportunities within the NSSF Act?
Employers with pension funds and gratuity arrangements should have been given free will to choose where to send their contributions. I also think the government should have considered an implementation period as opposed to the immediate change to allow employers to adjust budgets.
Recommendations for employers and employees on how to take the changes
Employers and employees should take the changes positively, after all, it’s for the good of both. For employees it mea increased retirement perks hence peace of mind in retirement while for the employer this ensures the staff are motivated due to future security. The employers also have an opportunity to sensitize their employees on financial literacy and ensure a savings or investment culture.