Private retirement schemes are holding Sh15.3 billion in pension contributions after thousands of employers chose to redirect part of their workers’ National Social Security Fund deductions to company-sponsored retirement plans, easing earlier concerns that private schemes would lose money under the expanded NSSF contribution framework.
Figures released by the Retirement Benefits Authority show that by December 2025, a total of 5,523 employers had received approval to transfer the higher NSSF deductions to their occupational pension schemes. The transfers have been taking place since July 2024 through a process known as opting out.
The data indicates that about Sh1.28 billion in contributions has been redirected each month under the tier II category. Over the entire period, the value of funds moved to employer-sponsored schemes reached Sh15.39 billion.
The shift has provided some relief to private pension schemes that had feared losing contributions to the State-run NSSF when the new contribution structure was introduced.
During the second half of last year, remittances to the NSSF dropped slightly by 3.05 percent as more employers opted to redirect the higher contributions to their own schemes. In that period alone, more than 2,000 employers completed the opt-out process.
“The drop in half-year contribution could be attributed to opting out of schemes that were previously remitting their tier II contributions to the statutory scheme,” RBA said in an industry report.
Under the current system, part of the NSSF deduction remains compulsory for all workers and employers. This portion, referred to as tier I, represents six percent of the lower earnings limit and must be remitted directly to the State fund.
However, the second portion known as tier II, which is also set at six percent but applies to the upper earnings limit, can be redirected to an employer’s occupational retirement scheme if approval is granted by the Retirement Benefits Authority.
For instance, an employee earning a gross salary of Sh108,000 contributes Sh540 to the NSSF under the tier I requirement. With the regulator’s approval, the employer can send the additional Sh6,480 tier II deduction to the company’s own pension scheme instead of the State fund.
Private pension schemes had raised concern when the NSSF Act of 2013 began to be implemented in February 2023. Many feared the expanded deductions would reduce the flow of contributions to occupational retirement plans.
At the early stages of implementation, approvals for employers seeking to contract out were slow, creating uncertainty in the industry. Private pension schemes also complained that the NSSF had interfered with the opting-out process, which they said pushed some employers to scale down or discontinue their existing retirement plans in order to manage the increased contribution costs.
To redirect the higher deductions, employers and the managers of their occupational pension schemes must both obtain certification from the Retirement Benefits Authority. Once approval is granted, the employer can retain the tier II contributions within its own retirement scheme instead of remitting them to the NSSF.