OPINION: NSSF conversation must move beyond monthly deductions

Mention the National Social Security Fund (NSSF) in any Nairobi office and the reaction is predictable: “The deductions are too high.” “My take-home pay has dropped.” Since the implementation of the NSSF Act 2013, the debate has centered almost entirely on what leaves employees’ pay slips each month, barely considering what they're building for tomorrow.

Combined employee and employer contributions will now reach up to Ksh.12,960 per month. The increase has generated strong reactions, but that focus is misplaced because the more important questions remain largely unexamined: even with higher contributions, are Kenyans on track to retire with dignity?

At a personal level, would your current NSSF contributions fund the retirement you are imagining? Current contribution levels suggest many are not. And for many, the uncomfortable answer to the second question is no.

NSSF is a foundation. It is the minimum contribution required by law, designed to provide a basic safety net, not fund the retirement lifestyle most professionals expect. If you're earning Ksh.200,000 monthly and imagine retiring to maintain even 75% of that lifestyle, you have to be very intentional about how much you are saving and closely monitor the performance of that investment. 

This is precisely why the quality and competitiveness of the pension scheme contracted to oversee Tier II deductions matters far more than most employees realise. When an employer decides to contract out of the NSSF Tier II and source for a retirement plan to manage the employee deductions, they are going beyond selecting a retirement saving plan to choosing a strategic partner that will steward their employees’ long-term financial security.

Employers, therefore, need to approach this decision with strategic seriousness. Base selection on measurable fund performance across market cycles, transparency of fees, governance structures, ICT capabilities, risk management capabilities and the provider’s ability to educate members consistently with the objective of achieving the recommended levels of income adequacy in retirement. Flexibility of the scheme also matters. Does it allow voluntary top-ups, saving towards post-retirement medical fund, varied risk portfolios and seamless reporting to members? Such administrative details are also determinants of retirement outcomes.

Some employers select service providers based on familiarity or convenience. Meanwhile, employees remain passive, unaware that their employers’ decisions are shaping their financial futures. This must change.

The difference between a pension fund offering a net annual return of 8% versus one offering a net return of 10% is the difference in millions of shillings in lost retirement wealth over a career. If not checked, that 2% could dramatically compound against you. Fees charged on the fund should also be reasonable and within the industry best practice to ensure that the future value of members’ savings is not eroded.

Employees, move beyond passive acceptance of whatever arrangement is provided. Few would tolerate unclear medical cover or opaque payroll deductions, yet many accept pension arrangements without scrutiny. Ask your trustees questions. They have a role to play in empowering you members with knowledge to make informed choices.

And for you employers, understand that retirement security is part of employee value. Go beyond the statutory minimum contributions. Educate staff about retirement adequacy. Help employees to save more through additional voluntary contributions. Offer financial education to help them balance between immediate needs and long-term financial security. Forward-thinking employers treat pension design as part of talent retention and long-term workforce stability.

But what does a successful retirement look like? It is replacing a meaningful portion of pre-retirement income without relying on children or continued informal work. It is meeting healthcare costs without liquidating assets in distress. It is having predictable, sustainable income streams that preserve dignity and independence. Retirement success is not luxury but stability and autonomy.

Increase in NSSF contributions has handed us a moment of national attention to retirement issues. We can waste this moment arguing about monthly deductions, or we can use it to fundamentally upgrade how we think about and plan for retirement. That means honest conversations about pension adequacy and a cultural shift from viewing pensions as an unfortunate deduction to seeing them as the foundation of future financial security.

Albanus is the Assistant General Manager, Enwealth Financial Services Limited