From this month onwards, for persons in formal employment, the pull from their wages will be even greater as the national social security fund introduces new contribution rates.
In a notice issued Thursday, February 12, NSSF announced that the new rates are already effective and requested employers to update the systems currently. This is the start of Year 4 from the Year 3 of the scheduled process of the NSSF Act.
Under new regulations, the initial 9,000 shillings of an employee’s salary will be subject to a 6 percent contribution from the employee and employer. This means an expense of 540 shillings from the employee, as well as an equivalent amount from the employer, making 1,080 shillings in Tier 1.
Income of between 9,000 to 108,000 shillings is labeled as Income II.
At the top tier level, both the employee and employer contribute 5,940 shillings, and the maximum contributions per employee will be 12,960 when you add the contributions from both tiers I and II.
They are also reminded to pay all these deductions to NSSF by the 9th day of the next month, starting from March.
To many workers, these changes will be felt with immediacy.
For instance, if we take an employee who earns 100,000 shillings on a monthly basis, under Tier I, 540 shillings will be allocated. The rest, 91,000 shillings, will fall under Tier II, and then 5,460 will be allocated as such. This means that in total, 6,000 shillings will be allocated as employee contributions, as opposed to the previous
For those on lower salaries, there will also be higher deductions, although not as proportionate as for the higher salaries.
These changes come at a time when many people have already been coping with the higher costs of living. NSSF claims the changes will help members save enough for retirement in the long-run.
The fund also announced its 17 percent net interest rate for the 2024/2025 financial year, which was shared at the 8th Annual General Meeting of NSSF held on 6th February.
Bearing in mind that bigger deductions can lead to tightened monthly budgets, NSSF states however that the end goal is to help Kenyans build stronger and more impactful retirement savings.
