NSSF seeks consultant to review contribution rates amid rising worker deductions

Kenya’s main public pension scheme is preparing for a fresh assessment that could influence how much workers and employers contribute monthly, after the National Social Security Fund (NSSF) began a process to hire an expert to evaluate its current rate structure and future adjustment model.

The fund is looking for an actuarial consultant to determine whether existing contribution levels remain sufficient and to develop a system that would allow routine reviews of deductions in line with changing economic and demographic conditions.

This comes shortly after the latest upward adjustment in NSSF contributions implemented in February, which lifted the ceiling to Sh6,480 from the earlier Sh200 per worker under the previous arrangement in 2022. A further increase is already scheduled to take effect next year, pushing the top contribution to Sh8,640.

The review is taking place against a backdrop of growing concern among salaried workers who are already dealing with multiple statutory deductions, including housing levy payments and contributions to the Social Health Authority, which have reduced monthly earnings for many households.

While the NSSF has not stated whether the exercise will lead to higher or lower deductions, the outcome is expected to guide future policy on contribution rates and the financial direction of the pension scheme.

“In order to comply with the provisions of the Retirement Benefits Act and to enhance the quality of the operational, financial, investment and solvency management of NSSF, the Fund invites proposals from actuarial firms interested in providing consultancy for actuarial and investment advisory services to the Board of Trustees,” the fund said in the tender document.

The selected consultant will also advise the Board of Trustees on broader financial governance issues, including how the fund oversees investment managers, custodians and other service providers responsible for handling retirement assets.

In addition, the firm will be required to provide input on how interest is credited to members’ accounts, how reserves are managed, and how investment strategy and asset allocation decisions are structured.

The planned assessment is also expected to revisit long-standing questions around pension adequacy, especially at a time when Kenya’s workforce is contributing more to retirement savings than in previous years following the implementation of the NSSF Act of 2013.

The law, which was rolled out in phases after prolonged legal disputes, replaced the earlier flat-rate system where workers contributed Sh200 per month, matched by employers.

Under the current structure, employees earning above Sh100,000 now contribute up to Sh6,480 monthly, marking a major shift in Kenya’s retirement savings system.

Actuarial reviews are standard in pension management and are used to test whether contribution levels can sustain future payouts to retirees without weakening the fund’s financial stability.

These assessments take into account factors such as inflation trends, wage growth, investment performance, and changes in life expectancy before recommending possible adjustments to contribution rates.

NSSF says periodic reviews are meant to ensure the fund remains stable while still delivering reliable income to retirees after they leave formal employment.

Supporters of the current contribution framework argue that stronger pension savings are necessary to address old-age poverty, especially as traditional family support systems weaken due to urbanisation and changing social structures.

They also note that many Kenyans reach retirement age without adequate savings, leaving a large number of elderly people dependent on limited state support or continued informal work.

Estimates show that more than 70 percent of Kenyans retire without a formal pension, relying instead on minimal payouts from the national pension scheme.

For years, total NSSF contributions stood at Sh400 per month, a system that produced relatively low retirement benefits, with average payouts at retirement often falling below Sh250,000.

At the same time, rising life expectancy has increased pressure on pension systems, as retirees now live longer and require more sustained income support.

This has been compounded by changing family structures, where fewer working-age relatives are available to support elderly dependents, particularly in urban settings.

In response, the government introduced a monthly stipend of Sh2,000 for citizens above 70 years to help cushion vulnerable elderly people.

The new consultancy could therefore set the stage for a more structured and regular system of reviewing NSSF contributions, potentially reshaping how retirement savings are managed and how much workers take home each month.