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A new dawn for pensioners in Kenya
By Arthur Kung’u
Njoroge Regeru & Co. Advocates 5thFebruary, 2014
The National Social Security Fund Act, 2013 (“ the NSSF Act 2013 ” ) was signed into law by President Uhuru Kenyatta on 24thDecember 2013 and it commenced on 10th
January, 2014. The Act repeals the National Social Security Fund Act, Chapter 258 of the laws of Kenya (“ the old NSSF Act” ). It is widely hoped that the promulgation of the NSSF Act 2013 will help in bringing an end to the numerous scandals and controversies involving embezzlement of funds that have plagued the national social security scheme in Kenya for many years. Pensioners are becoming increasingly hopeful that the money which they contribute monthly towards social security will be put to good use and appropriated accordingly by the managers and trustees of the scheme.
One of the main reasons for reviewing and repealing the old NSSF Act was in order to transform the NSSF into a social security fund in accordance with Article 43 of the Kenyan Constitution which makes social security a constitutional right for all Kenyans. Under the old regime, the scheme operated as a pension fund which did not provide social security benefits to its members but this has changed with the passing of the new Act.
Another reason was to increase the amount of contributions made to the social security scheme by and on behalf of the members. This was with a view to increasing the amount of funds available to pensioners upon retirement as well as to increase the funds of the scheme which can be invested in other ventures to generate more income for the benefit of the members of the scheme.
The NSSF Act 2013 now makes it mandatory for all employees to join and contribute to the National Social Security Fund, with only two categories of persons exempted. These are:
i) Persons entitled to exemption from contribution to social security under any International Convention
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The Act requires that every employer who employs one or more employees under a contract of service should register with the Fund as a contributing employer, and should make mandatory contributions on their employees’ behalf. Proof of registration with the scheme has been set as a precondition for an employer to deal with or access public services.
The governance structures of the national social security scheme are expected to be more transparent and accountable under the NSSF Act 2013, especially in regard to the appointment and removal of trustees of the Fund.
Various tax incentives are offered by the NSSF Act 2013, such as the exemption from payment of stamp duty on any benefit issued or refund of contributions made under the scheme. Moreover, any contributions made by a person to the Pension Fund or to a contracted out scheme, where applicable, shall form part of tax-deductible expenses in the computation of taxes payable by that person.
Another welcome provision of the NSSF Act 2013 is that it empowers the Cabinet Secretary responsible for labour matters to make regulations aimed at giving effect to any agreement which provides for reciprocal arrangements with the government of any country beyond the East African Community, in which a fund scheme similar to that in Kenya has been established.
Members and contributors to the NSSF scheme in Kenya will be also happy to note that the NSSF Act 2013 accords them protection in that any contributions made by members to the National Social Security Fund are excluded from attachment, even in the case of bankruptcy proceedings. Furthermore, the NSSF Act 2013 makes the account and benefits of a member of the National Social Security Fund inalienable and unassignable.
The NSSF 2013 Act also introduces a funeral grant for defraying funeral expenses, which is payable upon the death of a member who has paid at least six monthly contributions immediately preceding his or her death. The funeral grant is to be paid to the deceased member’s next of kin in a lump sum payment. This will assist many families in Kenya to offset some of the expensive costs associated with organizing funerals.
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