The National Social Security Fund (NSSF) is pushing for a change of law to allow members early access to part of their pension contributions before hitting 50 years.
The State-backed fund wants the NSSF Act, 2013 amended and aligned with the pensions law to ease the burden on workers who exit employment early.
The pensions law allows workers to access their benefits, including the matched employers’ contributions, before the early retirement age of 50 upon proof of being unemployed or when changing jobs.
“We also want to allow people to access their benefits. Let people access this money partially, just like they do in other pension schemes. The law is there, but under the NSSF Act, it’s not open to that option,” said the NSSF’s managing trustee, David Koross.
The NSSF’s proposal comes amid pressure from the Retirement Benefits Authority (RBA), the pension regulator, to stop workers from accessing their pension savings before age 50 in the quest to build a decent retirement nest egg.
The RBA is pushing to stop workers from accessing their pension savings before age 50 through changes that could appear in the July Finance Bill.
The regulator last year advised the Treasury to delete part of the law allowing workers under 50 to access half of their pension benefits when they change jobs.
The RBA reckons that early access should be allowed in cases of serious ill health or other limited circumstances like permanent migration from Kenya.
The law allowing early access has eroded retirement savings, warns the regulator, leaving retirees with inadequate savings upon retirement.
Official data shows more than 80 percent of senior citizens work for basic items, raising questions about the adequacy of pension payouts and coverage of retirement benefits.
The NSSF reckons that early assess of the contribution would ease economic hardships for workers who have been retrenched or declared redundant.
The NSSF Act, 2013 provides for pension payments to persons who have hit the retirement age of 60, or those who opt for early retirement after 50 years.
“A retirement pension shall be payable to a member who has attained pensionable age; or opted for early retirement having attained the age of 50 years but not having attained pensionable age,” the law says.
Kenya suffers from low pension coverage with more than 70 percent of workers retiring without a pension, save for the less than sufficient payout from the NSSF.
The NSSF’s monthly contributions stood at Sh200 for years and the fund on average paid out less than Sh250,000 when a member retires.
Workers are presently paying up to Sh4,320 monthly after NSSF contributions were increased in February 2023 and the monthly saving will rise to Sh6,480. Employers match the payments.
The higher contributions have lifted the pool of funds at the State-run national pension fund to more than Sh670 billion last month, from Sh295.6 billion in December 2022.
The NSSF reckons it is in a position to pay workers millions of shillings with the enhanced contributions.
It has the backing of the Central Organisation of Trade Unions (COTU), which has termed the proposal “a progressive thought.”
“Pension under normal circumstances is for retirement, but if the economic conditions get tough after a worker leaves employment, they should be allowed to access a portion of the pension,” a COTU representative told the Business Daily.
Kenyans on average are living longer and the rank of the elderly poor is rising as the traditional social fabric yields to the forces of rapid urbanisation and changing social and family trends.
In the past, social security was not a bother to many Kenyans because there was a large extended family to fall back on in the rural areas. But as the social fabric changes and more people opt to retire in urban centres, the trend is increasingly becoming a headache to policymakers.
This is what prompted the State to start a monthly stipend of Sh2,000 for those above 70 years to cushion them from old-age poverty.
A survey by the RBA established that more than half of retired Kenyans deemed their retirement savings inadequate.
