Higher deductions push NSSF’s share of pension contributions to 22pc

Pension savings with the National Social Security Fund (NSSF) more than doubled in the year to December 2024 after the second phase of higher mandatory contributions took effect, new data from the Retirement Benefits Authority (RBA) shows.

Contributions to NSSF rose to Sh59.1 billion from Sh25.3 billion the previous year, reflecting the impact of the graduated scheme that replaced the long-standing Sh200 flat rate.

The statutory fund’s share of pension contributions jumped to 22.4 per cent from 10.9 per cent, showing it is taking a bigger slice of the retirement savings market previously dominated by private schemes.

“Total contributions rose significantly in 2024, largely driven by increased employer and member contributions following the implementation of enhanced NSSF rates,” said the Retirement Benefits Authority.

Overall pension contributions across the industry grew 29 per cent to Sh263.4 billion from Sh204.9 billion in 2023.

This helped push total funds under NSSF management to Sh402 billion, accounting for 18 per cent of the sector’s Sh2.2 trillion pooled assets. Occupational schemes, however, still hold the biggest share with Sh1.44 trillion under their control.

The revised NSSF contributions are pegged on salary bands, with the maximum mandatory savings set at Sh2,160 in 2023 for workers earning up to Sh18,000 a month. In 2024, this ceiling doubled to Sh4,320, ensuring more inflows to the fund.

Employers contributed Sh145.4 billion to retirement schemes, while Sh117 billion came directly from employees’ payslips.

Special employer contributions amounted to Sh8.7 billion, reflecting additional support by companies toward their workers’ retirement savings.

Voluntary contributions from individuals stood at Sh1 billion, lower than the previous year.

“While normal contributions from both parties showed strong growth, additional voluntary contributions and medical fund contributions declined, suggesting a shift in focus toward mandatory contributions,” RBA noted.

However, challenges in remittances persisted, with unremitted contributions climbing 12 per cent to Sh69.4 billion from Sh61.7 billion.

Of this, Sh55.4 billion was delayed for more than 30 days, underlining cash flow problems facing some employers.