Discussions about setting up a social security scheme for Kenya started in the pre-independence years, and it was in 1961 that the colonial administration made a recommendation that a provident fund be established for Af- rican workers to create the foundation for a pension scheme in later years.
National Social Security Fund
After independence, the Government formed a national provident fund in November 1965, through an Act of Parliament, and called it the National Social Security Fund as provided for under Cap 258 of the Laws of Kenya.Contributions to the fund started in July 1966, and today, NSSF is the most elaborate social security provider for workers in Kenya.
It administers a provident fund scheme and provides basic social security services and welfare support to Kenyan workers. These include financial security in retirement, as well as basic security against contingencies such as employment injury, illness and/or disability and death. Generally, all workers, except casual employees, are compelled by law to register and contribute to the fund. Initially, the fund operated as a government department under the Ministry of Labour, but as member- ship grew and its operations became complex, the NSSF Act was amended in 1987 to transform it into an autonomous state corporation.
Thus, since 1988, NSSF has been administered and managed by a Board of Trustees, which is made up of representatives of the three key stakeholders: the Government, the workers, and the employers. It is a mandatory scheme for all formal sector employees in Kenya other than public service employees who have a separate pension plan. The fund also registers Kenyans living, studying and working in the Diaspora. Voluntary membership was introduced in 2006. The total cumulated membership of the NSSF is estimated at 3.5 million.
The organisation also identifies and engages in lucrative investment opportunities on behalf of the contributors. As at June 30, 2011, total assets of the fund stood at Kshs110.37 billion ($1.3 billion), up from Kshs98.61 billion ($1.16 billion) the previous year with investments in Treasury bills and bonds, equity shares, bank deposits and real estate. Contributions from members rose by one per cent from Kshs6.79 billion ($79.9 million) in 2010 to Kshs6.84 billion ($80.5 million) in 2011. An annual interest of 7.5 per cent was credited to members’ accounts, up from five per cent in 2010.
The organisation is supposed to cushion members against economic and social distresses, such as sicknesses, invalidity, old age and death. The benefits fall in different categories. The Age Benefit is the payment given to members who are 55 years and above, based on their savings plus interest. The Withdrawal Benefit refers to payment given to members at the age of 50, upon early retirement. The amount depends on their savings plus interest. The Invalidity Benefit caters for life’s unpredictability, for instance, in-capacitation through accident or disease. The Emigration Grant covers members who are leaving the country for good. While Funeral Grant is paid to the nominated dependant of a deceased member, the Survivor’s Benefits is payable to the next-of-kin of a deceased member, or an applicant with letters of administration. NSSF has decentralised its operations from its headquarters in Nairobi to branches countrywide. This has drastically reduced the processing time of benefit claims from 60 to 12 days, and made it possible for members to access other services with less difficulty. NSSF has now embarked on an ambitious reform programme intended to convert it from a provident fund scheme to a social insurance and pension plan
Retirement Benefits Authority
Its ultimate objective is to enforce professionalism and integrity in the retirement benefits industry, and in so doing, protect the interests of members and sponsors of retirement schemes. RBA became operational in October 2000, sealing a regulatory vacuum. Before its coming into force, retirement benefits schemes were regulated by fragmented legislation, mostly Trust and Income Tax Laws.
Since its inception, the authority has enhanced the industry’s customer confidence by promoting greater transparency and account- ability through annual audited financial statements and other statutory returns. Its work has also resulted into an increase in retirement schemes as more employers register such plans for their workers. (Read more in the Economy and Planning chapter) Kenya’s retirement benefits industry is structured as follows: a) National Social Security Fund b) Occupational Retirement Benefits Schemes voluntarily established schemes by employers for the benefit of employees. Occupational schemes are funded through contributions from employees and employers. c) Individual Retirement Benefits Schemes established by corporate institutions and are open to the general public, serve self-employed Kenyans and any other citizen who wishes to make additional voluntary contributions. d) The Civil Service pension scheme for all civil servants, which is a non- contributory and fully funded by the Government. However, there are plans to introduce a super-annuation scheme funded by shared contributions from civil servants and the Government. The Public Service Superannuation Scheme Act seeking to introduce the contributions, among other changes in the management of the Civil Servants retirement scheme, is already in place.