The Retirement Benefits Authority (RBA) has sought to demystify the proposed increment in pension deductions for salaried workers from next month urging Kenyans to view the new rates as an enhanced form of retirement savings.
RBA Chief Executive Officer Charles Machira said that the new deductions set to take effect next month as proposed in the National Social Security Fund (NSSF) Act 2013 was not a tax but a saving for retirees to live dignified lives in old age.
The RBA CEO added that the Act provided for a phased escalation of the contributions by both employer and employee and the formulas proposed under the schedules that contributions would double from the current Sh. 4,320.
“I would like to encourage our people in the labour force that you have been saving Sh. 400 before the NSSF act 2013, the provision now is that you are saving Sh. 8,640 which is employee money, and the employer contributes 50 percent of that for those who have salaries beyond Sh. 72, 000, but we can still apply the formula on a pro-rata basis for those earning a lesser amount,” Machira said.
He further clarified that the money does need to fully go to NSSF adding that for employees in other pension schemes, RBA offers opportunities to “Contract out” meaning that an amount that is beyond a particular threshold in this case Sh. 960 from February can remain in the pension scheme.
“What I’d like Kenyans to appreciate is that the space we’re enhancing we would like people to retire with adequate retirement income, NSSF is playing a critical role in filling the gap of adequacy in retirement,” Machira added.
Speaking on Thursday when he opened an annual conference of players in the pension industry held at a Nanyuki hotel, the RBA boss noted that the government released the National Retirement Benefits Policy which lays a foundation as to how we are going to re-align the retirement benefits industry with a view of ensuring that there is more robustness, opportunities and avenues for Kenyans to save for retirement.
Minet Insurance General Manager in charge of pensions Daniel Mainga whose company organized the conference noted that the forum brings together trustees from across the industry to dissect the new things in the pension market and also what is affecting the pension industry.
“What we are doing in such forums is to ensure that trustees are well impacted and prepared to ensure that we can formulate discussions that will give a way forward as well get visionary ideas,” Mainga said.
He added that the annual conferences were also meant to ensure that the pensions industry is constantly improving by creating value for the members’ contributions.
“This value is meant to secure their future at the point of retirement. We do not want a situation where an employee cannot access his/her benefits at the point of retirement,” he said.
Mainga also revealed that pension sector providers were engaged in alternative investments to shore up revenues such as renewable energy, warehousing, and coolers since we have discovered that these are areas that are yet to be fully explored especially in the pension sector.
By Martin Munyi