Kenya: new NSSF contributions and the link to pension plans


published on 16 March 2023 | reading time approx. 5 minutes

This Article outlines some of the salient aspects of the new contribution structure under the NSSF Act, 2013 ("NSSF Act") and options available to employees in managing them. It further highlights in brief the types of pension plans an employer may consider as part of exercising the available options in the management of the contribution categories.


A brief background

The implementation of the NSSF Act took effect after the Court of Appeal’s ruling of 3rd February 2023. The commencement date of the NSSF Act would have been 10th January 2014 had the same not been challenged by a court case that was filed by Kenya Tea Growers Association and 14 others in 2013 at the Employment and Labour Relations Court (ELRC). The matter was ruled in their favour on the 19th September 2022 necessitating an appeal by NSSF where the Court of Appeal set aside the entire judgment of the Employment Court paving way for the implementation of the NSSF Act in February 2023. Although the County Pensioners Association later filed an appeal at the Supreme Court, as at the time of publishing this Article, there were no court orders stopping the implementation of the NSSF Act.


Salient features of the NSSF as created under the NSSF Act

The Fund was established to provide social security by increasing the membership coverage of the social security scheme and improving the adequacy of benefits paid out to the scheme by the Fund. It provides a full opt-out at Tier II level of contributions for employers who have or are contributing to pension schemes approved and registered by the Retirement Benefits Authority (RBA).

The Act creates a Pension Fund which is mandatory at the national level and a Provident Fund which is voluntary and accommodates self-employed individuals. The Pensionable Age is 60 years, and 50 years is considered as the early retirement age. The Pension Fund benefits take the form of a retirement pension, an invalidity pension, a survivor’s benefit, a funeral grant and an emigration benefit. The Provident Fund benefits include an age benefit, survivor’s benefit, invalidity benefit and an emigration benefit.
The NSSF is exempt from the Stamp Duty Act, the Income Tax Act and contributions to the Pension Fund form part of tax-deductible expenses in computation of taxes. The retirement Benefits Act applies to Fund which is also subject to an actuarial valuation every 3 years to determine its financial status.
The benefits payable under the Act may not be assigned, set off against any debt or attached in any form under a judgment. A prescribed portion may however be assigned and used by a member to secure a mortgage loan from a bank, a building society or a similar financial institution as prescribed under the Retirement Benefits Act.

Payment of the NSSF contributions by employers

The Contributions are categorised into two; Tier I and Tier II. Tier I contributions are based on pensionable earnings up to the Lower Earning Limit (LEL) whereas Tier II contributions are based on the difference between the Upper Earning Limit (UEL) and the LEL. The LEL and UEL for the first year of implementation shall be 6,000 and 18,000 respectively as illustrated:
​Tier I
​Tier II
​6 % (6,000)
​​6 % (12,000)
Thereafter Employers will be advised from time to time on the LEL and the UEL in accordance with the provisions of the NSSF Act.

Management of Tier II contributions - the contracting out option

An employer may choose to pay Tier II contributions to a Private Pension Scheme which for purposes of the NSSF Act is called a Contracted-Out Scheme. Tier I contributions must be remitted to NSSF.

Conditions for contracting out

The NSSF Act sets out conditions that an Employer must comply with prior to making Tier II contributions to a Private Pension Scheme. To this end, the Employer is required to issue a 60 days’ notice to RBA requesting for approval to make the said contributions to a specified Private Pension Scheme. The Act sets out mandatory conditions that the Private Pension Schemes must meet to be considered for approval. The Schemes will require a Reference Scheme Certificate issued by the RBA which is evidence that the schemes are compliant with the regulations set out in the Retirement Benefits Act. The issuance of a Reference Scheme Certificate is an indicator that the specific scheme is compliant with the following conditions, it ...
  • is registered by the RBA and has a valid registration certificate.
  • is registered with the KRA as an exempt scheme.
  • complies with the NSSF Act 2013 conditions for Defined Contribution Schemes and Defined Contributions Schemes.
  • maintains an accurate record of the Tier II contributions/protected rights as prescribed by RBA.
  • complies with the Investment Guidelines under the RBA.
  • complies with the RBA regulations and requirements.


Upon receipt of the 60 days’ notice, RBA reviews the notice and if it finds the Private Pension Scheme suitable it proceeds to grant a Contracting- out Certificate. The said certificate grants the employer the authority to remit Tier II contributions to the Pension Scheme. 



The provisions of the NSSF Act do not apply to persons entitled to exemption from contribution to social security under any International Convention. Further, persons not ordinarily resident in Kenya who are employed in Kenya for periods not exceeding three years at any one time (or such longer periods as may be prescribed), being persons who are liable to contribute to or are or shall be entitled to benefit from the social security Fund or similar body of any country other than Kenya and approved in writing, are also exempt.

Types of pension plans and pension scheme designs in Kenya 

Contracting out is an option that may be considered by Employers who already have an Occupational Pension Scheme, are considering forming one for their organisations or joining an existing Umbrella Scheme that incorporates different employers or individuals. These Pension Schemes may take different forms of designs based on other factors such as the investment model (Segregated or Guaranteed), the contribution structure (Defined Benefit or Defined Contribution) or the final payment plan (Provident Fund or a Pension Fund). 
The preferred investment strategy, informed by factors such as the organization’s risk appetite, will determine whether an employer would opt for a pension scheme that provides a guaranteed annual rate of return or one that declares a rate of return based on the market’s performance or a hybrid. 
An employer’s funding model may inform an employer to prefer a Defined Benefits design where the retirement benefits are defined in advance based on an employee’s salary or years of service as opposed to a Defined Contribution scheme where the monthly contribution amount is fixed, and the contributions accumulated overtime determine the total retirement benefit. The preferred mode of receiving the final retirement benefit will then inform an employer whether to consider a design that will pay the benefit as a lumpsum, or a periodic payment called a pension/ annuity or a hybrid form.
These factors that inform the choice of the pension plan and pension scheme design will ordinarily vary from one employer to the other subject to statutory guidelines issued through applicable laws from time to time.


Generally, and for various notable reasons, Occupational Pension Schemes continue to gain popularity among employers. The contributions made towards pension have been seen as a tax saving measure of up to KES 20,000 for employees and the benefit can also be used to secure a mortgage. In terms of managing employees as a critical organizational resource, this initiative helps to boost employees’ morale hence attracting and retaining skill and talent for the employer.
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