Higher deductions push NSSF contributions up by Sh220 billion

Kenyans have collectively saved an additional Sh220 billion in the National Social Security Fund (NSSF) since the implementation of higher contribution rates in February 2023.

According to NSSF, the surge in savings has been driven by the implementation of the NSSF Act of 2013, which has significantly increased member contributions.

Under the revised model, employers and employees contribute more towards retirement savings, boosting the fund’s collections.

The higher deductions have accelerated the growth of the State-backed national pension scheme, pushing its total assets close to the Sh600 billion mark, two years ahead of schedule.

“Within the short period of implementation, about two years, we have saved an additional Sh220 billion,” NSSF Managing Trustee David Koros said.

“In our strategic plan, we had planned that we would hit Sh600 billion in assets by June 2026. However, by June this year, we will be at the Sh600 billion mark.”

Koros noted an improvement in financial discipline among contributors, accompanied by increased awareness of the importance of future planning. He emphasised that the growing contributions are expected to greatly strengthen social security for Kenyans.

The NSSF Act, 2013, entered its third phase in February this year, doubling monthly contributions from a maximum of Sh2,160 to Sh4,320. This marked the second major increase in contributions since the reform took effect.

In February 2023, member contributions had already risen from a flat rate of Sh200 to Sh1,080, before climbing to Sh2,160 in February 2024. The contributions are expected to rise further to Sh6,480 in 2026. Starting in 2027, deductions will be determined by government-gazetted lower and upper earnings limits.

Data from the Retirement Benefits Authority (RBA) shows that by December 31, 2024, NSSF’s net assets stood at Sh476.8 billion. This represents a Sh74.8 billion increase within the second half of 2024 alone. Of this, Sh424.6 billion was externally managed by Gen Africa Asset Managers, African Alliance Kenya Investment Bank and Co-op Trust, while Sh52.2 billion was internally managed by NSSF.

“The growth in total funds under management by NSSF, both internally and externally, has been driven by growth in member contributions over the last few years,” RBA noted.

Most of the fund’s assets, 67.4 per cent, are invested in government securities. Another 14.28 per cent is held in listed shares, while the rest is spread across immovable property, fixed deposits, unlisted shares, corporate bonds, cash and demand deposits.

The expansion of NSSF’s asset base has also supported the broader pension industry, with total pension assets in the country rising to Sh2.25 trillion by the end of 2024, up from Sh1.72 trillion a year earlier. The sector has also benefited from increased investment income, particularly during the first half of 2024, driven by higher interest rates.

About 92 per cent of pension assets remain concentrated in four traditional asset classes—government securities, guaranteed funds, quoted equities and immovable properties, underlining the industry’s conservative investment approach despite the strong growth.

NSSF was established in 1965 by an Act of Parliament (CAP 258 of the Laws of Kenya) in order to administer a provident fund scheme for all workers in Kenya. Originally functioning as a government department within the Ministry of Labour, the Fund underwent significant changes as its membership expanded and its operations grew more complex.

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In 1987, the NSSF Act was revised to establish the Fund as an independent State Corporation. Since 1988, it has been governed by a Board of Trustees comprising representatives from three main stakeholder groups: the government, workers and employers.