The Retirement Benefits Authority (RBA) has granted clearance to 84 private pension schemes to handle tier-II contributions of the National Social Security Fund (NSSF). This is a significant development that could lead to a more competitive and balanced landscape for pension contributions management in Kenya.
The tier-II contributions are part of the 2013 NSSF Act, which commenced in February and has since generated billions in new pension funds. With several renowned schemes, such as CIC Life Assurance, Octagon Africa, and Old Mutual among those cleared by the regulator, the stage is set for a dynamic battle between private pension providers and the NSSF.
The RBA’s decision is expected to result in a substantial influx of approximately Sh12.43 billion in new pension funds in the first year of implementation alone. This is a crucial step towards ensuring higher income replacement rates and addressing concerns about the adequacy of pension funds.
Employers also have the option to channel contributions outside the NSSF. As the RBA continues to facilitate these developments, we expect that employers with supplementary schemes will apply to channel tier-II NSSF contributions into their own schemes.
This is a positive development for Kenyan workers, as it gives them more options for managing their retirement savings. It also creates a more competitive environment for pension providers, which should lead to better services and lower fees for workers.
What does this mean for you?
If you are a Kenyan worker, this development means that you have more options for managing your retirement savings. You can now choose to contribute to a private pension scheme, in addition to or instead of the NSSF. This gives you more control over your retirement savings and can help you to achieve your retirement goals.
If you are an employer, this development means that you have more options for managing your employees’ retirement savings. You can now choose to channel contributions to a private pension scheme, in addition to or instead of the NSSF. This can help you to attract and retain employees, and can also help you to reduce your overall costs.
The goal of this legal alert is to inform our readers of the latest developments in the Kenyan pension landscape and foster an open exchange of ideas and perspectives related to the topic. The information presented should not be construed as legal advice or a definitive position on the matter, and individuals should seek professional legal counsel for specific situations or concerns.
If you have any questions or concerns, please do not hesitate to contact us.
