President Ruto says Gov't to match pension contributions in national savings drive
The government has declared plans to match pension contributions by the informal sector in a bid to lift national savings.
The plan which could see the overhauling of the National Social Security Fund (NSSF) structure will see the government match contributions towards retirement savings by 50 per cent.
According to President William Ruto, the new framework will set the government contribute up to a maximum of Ksh.3000 per year on savings per person covered in the new structure, or an equivalent Ksh.250 per month.
“We intend to overhaul our social security infrastructure to make it inclusive, to encourage those excluded to save. I will be proposing a national savings drive to encourage those in the informal sector to set up their retirement savings plan. For every two shillings saved in the scheme, up to a maximum of Ksh.6,000 a year, the government will contribute one shilling,” President Ruto said on Thursday.
In the address to a joint Parliamentary sitting, President Ruto doubled down on previous remarks that saw him lament the current savings structure which he deems to be ‘unhelpful’ to Kenyans, especially those in the informal jobs sector.
“There is no retired Kenyan today who is living on their NSSF retirement benefits. The meagre current contribution of Ksh.200 a month adds up to Ksh.72,000 over 30 years. There is no rate of return on earth that could grow this into adequate pension,” added President Ruto.
“For Kenya to grow to an upper middle-income country, we need to invest at least 25 per cent of our GDP. Our current national savings rate is below 10 per cent of our GDP which translates to an investments-savings deficit of 15 per cent of GDP.”
Currently, formally employed Kenyans contribute a minimum of Ksh.200 towards retirement through the NSSF per month as statutory deductions.
Informal sector workers have had to result to making voluntary pension savings both through the NSSF or privately setup pension schemes.
Attempts to raise the mandatory pension contribution from the current Ksh.200 through the 2013 NSSF Act fumbled with the changed being deemed null and avoid in court with the Act having failed to go through Senate in its passage.
According to official data from NSSF, only 2.55 million Kenyans are active members of the Fund which has Ksh.14.7 billion in total member contributions in the fiscal year ended June 2021.
During the fiscal year, NSSF paid out just Ksh.5.8 billion in benefits to members.
Kenyans are at liberty to contribute more to the NSSF or any other pension scheme.
The government has nevertheless previously mulled to raise mandatory contributions and force employers to match the contribution in attempts to lift the country’s savings rate.
Kenya’s national savings rate currently sits below 10 per cent of GDP.
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