Kenya_National_Social_Security_Fund_Reforms_Presentation.pdf

This is ideallyChatGPT said:The presentation provides an overview of Kenya’s pension and social protection system, highlighting key reforms and structural components. Kenya’s pension sector is composed of both contributory and non-contributory schemes, including the Civil Service Pension Scheme (Pay-As-You-Go), the National Social Security Fund (NSSF), occupational, and individual pension schemes. The NSSF Act of 2013 transformed the fund from a provident to a pension scheme to enhance benefit adequacy, expand coverage, and ensure sustainability. The Civil Service Superannuation Scheme introduced mandatory contributions (7.5% employee and 15% government) to move from a non-funded system to a funded one. The Retirement Benefits Authority (RBA) regulates and supervises the industry, ensuring member protection and promoting sector growth. Despite notable progress—with over 1.7 million members and growing assets—challenges remain, such as low coverage, inadequate benefits, and limited inclusion of informal workers. To address this, innovative initiatives like the Mbao Pension Plan were introduced, enabling informal sector workers to contribute as little as Ksh. 20 daily via mobile platforms. Overall, Kenya’s pension reforms aim to achieve adequacy, sustainability, and inclusivity across all employment sectors.

1. GROUP PRESENTATION -KENYA
LaminConteh–SieraaLeone
Tom Kiptanui -Kenya
Lazarus keizi-Kenya
Shem Ouma -Kenya
Winnie Mwalimu-Kenya
Elizabeth Waruingi -Kenya
Felix Nkhoma-Malawi
Golden Nyasulu-Malawi
Polycarp Anyanwu–Nigeria
ThandazileThela–South Africa

2. OUTLINE
•Country profile
•Structure of the pension sector -2017
•NSSF reforms
•Civil Service Superannuation Scheme Reforms
•Social Protection system
•Implication of reforms

3. Country Profile
•GDP $ 61.1 billion
•GDP growth 5.3%
•GDP per capita $ 1424 (2014)
•Population is approximately 43 million
•Older Persons 60 years+ 1.9 million
•Employment (public & private) 2.37 M
•No. of poor households with 65+ years
504,114

4. STRUCTURE OF THE PENSION SECTOR -2017
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Pension
System
Non
Contributory/Pay As You
Go (PAYG)
Civil
Service Pension Scheme
Members ->700,000
Assets -0
Public Service Superannuation Act 2012 -
DC
Private
Occupational –
Employer Based
(Voluntary)
Members >550,000
Assets –747bn
(USD7,1 Billion)
Individual
Contributory Open
Schemes
-Offered by Insurance
Companies
Members –176,000
Assets -32 bn.
(USD 0.3 billion)
Mandatory
National –National
Social Security Fund
Assets -158bn (USD1.5
billion)
Members >2.6 m
NSSF Act 2013 –Pension &
Provident

5. KENYAN PENSION LEGAL &
REGULATORY FRAMEWORK
Civil Service
Pension Scheme
National Social
Security Fund
Occupational,
Umbrella &
Individual Schemes
Legal StructureAct of ParliamentAct of ParliamentWritten Law/Trust
Deed
Membership All civil servantsFormal/ informal
sector
Formal
sector/informal
sector
Funding Non-funded Funded Funded
Regulation Exempt from RBASubjectto RBA Subject to RBA

6. NATIONAL SOCIAL SECURITY FUND -I
OLD NSSF PROVIDENT
FUND
REFORM: NSSF, 2013
MembershipMandatory
Exemptions to
participation
grantedbyMinister
ofLaboure.g.to
permanent &
pensionablecivil
servants
Mandatoryforformalsector
includingGovernment
Tier1&provisionforoptoutat
TierII
Voluntaryforselfemployed
Design ProvidentFund PensionFund
Selfemployed–ProvidentFund

7. NATIONAL SOCIAL SECURITY FUND -II
OLD NSSF PROVIDENTFUNDNSSF, 2013
RegistrationPreviouslyemployerwith
5ormoreemployees
Ministercouldexempt
certainpersonsfrom
contributinge.g.civil
servantsexempted
Everyemployerwhoemploys1
employeeormore
Contributions5%employer&employee
cappedatUS$4.60
(Ksh400).
12%(6%ER&6%EE)of
pensionableearningsi.e.all
wagespayabletoemployee
excludingfluctuatingemoluments
Pensionableearningscappedat
UpperEarningsLimit

8. NATIONAL SOCIAL SECURITY FUND -III
OLD NSSF PROVIDENT
FUND
NSSF, 2013
Expenses Concerns on high
expenses
Administrationexpensesshallnot
exceed2%ofthetotalassetsofthe
fundinthefirstyearandreduce
subsequently–cappedat1.5%in
6
th
year
Trustees Representative from
MoLSS,MoF, COTU,
FKE and other experts
PSFinance,PSMoLSS,
7appointeesbyCSMoLSS-2from
mostrepresentativeemployer
organization; 2 workers
organization;3expertsonewhowill
bechair

9. NSSF ACT NO. 45 OF 2013
Objectives
•Providebasicsocialsecurity
•Widencoverageofthesocialsecurityscheme
•Improveadequacyofbenefitspaidout–increasedcontributions&pension
asopposedtooneofflumpsumbenefits
•ProvidefulloptoutatTierIIforemployerswhohaveorarecontributingto
pensionschemesapprovedandregisteredbytheAuthority
•Enableselfemployedpersonstoaccesssocialsecuritybycontributingtothe
providentfund
•Operate and manage a scheme that is value-adding to its members

10. NSSF:REGISTRATION & MEMBERSHIP
•TheBoardshallretainandcontinuetooperatetheOldProvidentFund
previouslyoperatedunderthenowrepealedNationalSocialSecurity
FundAct.Thisisforthepurposeofsettlingoutstandingmattersunder
theAct.Benefitswillberingfencedandaccruedbenefitspaidfromthe
oldfund.
•AllmembersoftheOldProvidentFundotherthanmembersmaking
voluntarycontributionstotheOldProvidentFundshall,onthe
commencementdate,becomemembersofthePensionFund
•TheManagingTrusteeshallcauseanewaccounttobeopenedin
accordanceprovisionsoftheAct.

11. NSSF: CONTRIBUTIONS
•Everyemployerisrequiredtoberegistered
withtheNSSFandmaketheTier1mandatory
contributionstotheNSSF
•EmployersareallowedtooptoutoftheNSSF
andmakeTierIIcontributionstoanyother
approvedregisteredretirementscheme
subjecttotheapprovaloftheRBA

12. REGULATOR’S MANDATE
The Retirement Benefits sector in Kenya is covered under the Retirement
Benefits Act No. 3 of 1997 .
The Act also establishes the Retirement Benefits Authority (RBA), which is the
pension regulatory body under the National Treasury with the mandate to;
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REGULATE &
SUPERVISE
Establishment and
Management of
retirement benefits
schemes
PROTECT
Interests of
scheme
members and
sponsors
DEVELOP &
PROMOTE
The
Retirement
benefits
industry
ADVISE
The Cabinet
Secretary to
The National
Treasury on
national policy
relating to the
industry
IMPLEMENT
All government
policy relating to
the industry

13. STRUCTURE OF RETIREMENT BENEFITS INDUSTRY –SECTOR PLAYERS
RBA
RETIREMENT
BENEFIT SCHEMES
1306
Trustees in charge of
management of
schemes and
members as
beneficiaries
FUND MANAGERS
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Role to advise
trustees on available
investment vehicles,
expected risk and
return
CUSTODIANS
11
Role to hold assets of
scheme for safe
keeping, e.g. cash,
securities, title
documents of
schemes; settle
transactions, receive
contributions
ADMINISTRATORS
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Administrative duties
of a scheme including
keeping member
records, computing
and paying benefits;
liaising with service
providers and the
regulator

14. PENSION SECTOR PERFORMANCE
Retirement Benefits Industry young
but growing
Has 1306 registered schemes with
over 1.7 million members
Pension assets grew from Kshs.
117.4 billion in 2002 to Kshs. 814.1
billion in December 2015
As a share of GDP, improved from
11.5 percent in 2002 to approximately
18.3 percent in 2013 but dropped to
14.7 percent in December 2014
Pension Coverage = 18.2% [2015]

15. CHALLENGES OF THE RETIREMENT BENEFITS SECTOR
•LowReplacementRates/In-adequacyofbenefits:Low
contributions,shortcontributionperiodsandleakagesdueto
earlywithdrawals
•LowPensioncoverage:hasstagnatedatabout18%dueto
voluntarypensionsystemandinadequateincentivestosave.
•Poorsavingculture-professionals/consultantsnotmembers
•Lowreturns-Duetoshallowcapitalmarkets
•Loyaltytoinvestmentintraditionalassets-Fearofalternative
investments

16. •InterferencefromSponsors:Managementof
Schemes,appointmentofserviceproviders
•Fundingofschemes:Unremitted
contributions,unfundedbenefits
•Labormarketskewedtoinformal
employmentinformalsectorwhichislargely
uncovered
PENSION SECTORCHALLENGES

17. CIVIL SERVICE PENSION SCHEME
•established under Acts of Parliament
•provide retirement benefits for all civil
servants employed by the National and county
governments
•currently –Pay as You Go and non funded and
non-contributory
•Coverage -700,000 civil servants

18. REFORM : Civil Service Superannuation
Scheme -1
•Established under an ACT of Parliament –Civil
Service Superannuation Scheme Act
•The goal was to attain sustainability and
adequacy

19. REFORM : Civil Service Superannuation
Scheme -2
•The objective of the Scheme is to:
•(a) pay retirement benefits to members of the Scheme;
•(b) ensure that every member of the Scheme receives his
retirement benefits as and when they become due;
•(c) assist to improve the social security of members of the Scheme
by ensuring that the members save in order to cater for their
livelihood during their retirement; and
•(d) establish a uniform set of rules, regulations and standards for
the administration and payment of retirement benefits for
members of the Scheme.

20. Contribution Rates
•Every member of the Scheme shall contribute 7.5% which shall be deducted from his monthly
pensionable emoluments
•The Government shall make a contribution for each member of the Scheme at the rate of at
least fifteen percent of the member's monthly pensionable emoluments
•The Government's contribution under subsection (2) shall be a direct charge on the
Consolidated Fund.
•Additional voluntary contributions to the Scheme are allowed.
•In addition to the Government shall take out and maintain a life insurance policy that has
disability benefits in favour of every member of the Scheme, for a minimum of five times of
the member's annual pensionable emoluments.

21. SOCIAL PROTECTION COMPONENTS

22. CASH TRANSFER PROGRAMS IN KENYA

23. CASH TRANSFER PROGRAMS

24. ELIGIBILITY CRITERIA FOR OLDER
PERSONS
•65 Years and above
•Must be poor and vulnerable
•Beneficiary/Household must not be enrolled in any
other cash transfer program
•A member of the household must not be receiving any
pension and/or regular income
•A member of the household must not be in any gainful
employment
•Kshs. 2000 paid per household every two months
through appointed payment agent –Equity & KCB
Banks.

25. IMPLICATIONS OF THE REFORMS
•ADEQUACY
•SUSTAINABILITY
•AFFORDABILTY

26. INFORMAL SECTOR REFORM
DevelopmentandPromotionofInnovativepensionProducts:
•WhyInformalSector?
•RBAistopromotedevelopmentofthepensionsector
•Mostnewjobscreatedintheinformalsector
•ContributessignificantlytoGDPabout18%
•Butworkers;
•EarnLowandIrregularIncomes
•Changejobs&economicactivitiesfrequentlytherebyexperiencinghighlabor
mobility
•Theseattributes,amongstothers,cannotenablethemtoparticipateinexisting
pensionarrangementsthatserveworkersintheformalsectorwhoearnregular
andstableincomesandcanthereforeaffordtomakepredeterminedmonthly
contributionstowardstheirretirementbenefits.
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27. INFORMALSECTOR REFORM
DevelopmentandPromotionofInnovativepensionProducts:
•RBAandtheNationalFederationofJuaKaliAssociations(anumbrellabodyforworkers
intheinformalsector)andotherstakeholders,therefore,enteredintocollaborationto
establishasuitableretirementbenefitsschemethatwouldcaterforworkersinthe
informalsector.
•BirthofMbaoPensionPlan;
•TheBlueMSMEJuaKaliIndividualRetirementBenefitsSchemepopularlyknownasthe
“MbaoPensionPlan”whichtargetsthelargerworkingpopulation(85%)intheinformal(Jua
Kali)sectorwasconceptualisedandofficiallylaunchedinJune2011andgainedimmense
popularlyamongthepopulationworkingintheinformalsectorandtheselfemployed.
•Targetworkersintheinformalsectorwhorunmicro,smallandmediumenterprises(MSMEs)
•Itisavoluntarydefinedcontributionprovidentfund.
•ItbeganasasuccessfulCorporateSocialInvestment(CSI)initiative.
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28. INFORMAL SECTOR REFORM
DevelopmentandPromotionofInnovativepensionProducts:
•TheAuthoritypartneredwithear,noseandthroatspecialists,theOperationEarDrop
KenyatoundertakeaHearingConservationProgramme,toprovidefreeearcheck-up
forartisansparticularlytargetingweldersandtinsmithsataNairobiestatecalled
Kamukunji.
•DuringtheeventRBAconductedpensioneducationandawarenesscampaignstothe
JuaKaliartisansontheimportanceofsavingforretirement.Targetworkersinthe
informalsectorwhorunmicro,smallandmediumenterprises(MSMEs)
•Subsequentmeetingswereheldwiththeirrepresentativestodiscusswaysofforminga
pensionschemeforthemtoenablethemsaveforretirement.
•TheSchemewaslaunchedinNairobiandhassinceexpandedtocoverall47countiesin
Kenya.
•Mbaomembershipstandsatabout65,817memberswithafundvalueofKsh.
104,883,966millionasatJune2015.
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29. INFORMAL SECTOR REFORM
DevelopmentandPromotionofInnovativepensionProducts:
•Thepensionschemeiscalled“Mbao”becausethisisaKenyancolloquialwordforKshs.
20,whichwastheequivalentofoneSterlingPound(locallypronouncedMbao)justat
independencein1963.TodayitistheequivalentofUS$0.2.
•TheschemerequiresmemberstomakedailyminimumKshs.20contributionusingtheir
mobilephones.Subsequentmeetingswereheldwiththeirrepresentativestodiscuss
waysofformingapensionschemeforthemtoenablethemsaveforretirement.
•Theyusethemobilemoneytransferservicesofferedbythetwoleadingmobilephone
networksinKenya,namely,SafaricomandAirtel.
•TheycanthereforemaketheirpaymentsthroughM-PESAandAirtelMoneytransfer
servicesinrealtime24hoursadayandfromanywherewithinthemobilephone
networkcoverage.
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30. INFORMAL SECTOR REFORM
DevelopmentandPromotionofInnovativepensionProducts:
•Thecontributionsarereflectedinstantlyonthemembers’phonesasreceiptedbythe
Fundandareabletocheckcontributionbalances.
•MbaoPensionPlanhashelpedaddress3things;
•Problemoflowincomes-Kshs.20perdayisaffordabletomostpeopleworkingin
theinformalsector.
•Seasonality/irregularityofincomes-inthesectorfortheycanmakebulk
contributionstocoverperiodsofnoincome
•highlabormobility-inthesectorbecausebyusingmobilephonestomake
contributions,theycandoitfromanywhereanytime,dayornight.
•Mbaomembershipstandsatabout65,817memberswithafundvalueofKsh.
104,883,966millionasatJune2015.ItiscurrentlythelargestIPP
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31. SCHEME GOVERNANCE
•SPONSOR:JuaKaliAssociation
•CORPORATETRUSTEE:KenyaCommercialBank
•AppointsServiceProviders:
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