Workers will pay up to Sh2,160 extra to the National Social Security Fund (NSSF) from February, weakening their purchasing power.
This marks the fourth year of implementing the higher mandatory NSSF contributions, which increased to a maximum of Sh1,080 in 2022 from Sh200 and the current Sh4,320.
The higher payouts have coincided with a five-year period that has seen salary increases lag cost-of-living measures.
Employees earning less than Sh50,000 will not be affected by the latest review of the NSSF rates, which will see workers earning more than Sh100,000 pay Sh6,480 monthly from the current Sh4,320.
However, the workers will see their payslips shrink by Sh1,512, not Sh2,160, because the NSSF is a tax-deductible expense that workers subtract from their gross pay to reduce the income subject to taxation.
Employers are expected to match the workers’ NSSF contribution, raising the maximum total payment to the fund to Sh12,960.
Workers under a private pension scheme can be spared the additional pain on their payslips with the approval of the regulator-the Retirement Benefits Authority (RBA).
Their employers can reduce the contribution to the company-sponsored schemes by Sh2,160 and transfer the amount to the NSSF, offering relief to the workers.
The higher contributions have made NSSF Kenya’s largest pension fund, with assets of Sh558 billion at the end of June from Sh476 billion last December and Sh295.6 billion in December 2022.
The annual contributions to the fund increased to Sh83.97 billion in the year to June from Sh19.29 billion in the year to June 2022.
This is expected to cross the Sh100 billion-mark next year due to the higher rates.
‘Contributions to NSSF have been on steady growth over the last three years. The increase in contributions is attributed to the continued implementation of the NSSF Act 2013,’ said the Retirement Benefits Authority (RBA).
The higher rates have come when workers’ disposable income has shrunk further due to additional taxes and levies, including the housing tax and the controversial healthcare insurance levy.
The Affordable housing law requires employers in the formal and informal sectors to deduct 1.5 percent of gross monthly pay from workers, matching the contributions towards the housing levy.