Pension sector grows in assets but struggles with shrinking new membership

Kenya’s pension industry is showing signs of strain as fewer workers are joining retirement schemes, a trend linked to the growth of casual, contract, and gig employment.

Despite rising overall contributions and record fund values, the number of new members entering the system is slowing, raising concerns about long-term sustainability.

Data from the Retirement Benefits Authority (RBA) reveals that in 2024, only 245,581 new contributors were registered, highlighting the impact of slow formal job creation and the increasing dependence on temporary or outsourced labour.

The total number of active pension scheme members reached 3.75 million, but the pace of new enrolments is lagging behind the sector’s growth in funds.

Most of the recent additions were driven by mandatory contributions under the National Social Security Fund (NSSF), which added 200,183 members in 2024.

Analysts say this pattern reflects structural issues in the labour market, with many companies relying on short-term contracts or casual staff, leaving large portions of the workforce outside retirement schemes.

The RBA noted that reforms under the NSSF Act and ongoing efforts to broaden coverage have increased inflows, yet they have had limited effect on expanding membership.

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

It adds: “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.”

Kenya’s pension coverage ratio remained at 26.57 per cent in 2024, meaning about three out of every four working-age Kenyans aged 18 to 60 are not saving for retirement through a regulated scheme.

This gap is most pronounced among informal workers who remain outside formal savings systems.

Meanwhile, total contributions to pension schemes rose by 29 per cent to Sh263.5 billion in 2024, boosted by higher employer and employee remittances following the gradual rollout of new NSSF rates.

The industry’s total fund value reached Sh2.23 trillion, up from Sh1.84 trillion in 2023, supported by a 74 per cent rise in investment income and steady growth in assets, with government securities continuing to dominate investments.

Experts warn that without more formal job opportunities, expanding pension coverage will remain difficult.

“The strength of the pension sector is being supported by larger schemes and higher contributions, but the base of contributors is not widening fast enough,” the RBA observed.

The report also highlighted concerns over unpaid contributions, which increased to Sh69.4 billion in 2024, mainly due to delays by employers, particularly in government institutions.

To address this, the authority is pushing for legal changes to hold chief executives and accounting officers of state agencies responsible for statutory deductions that are collected but not remitted.