The news of the Court of Appeal judgment hit the retirement benefits sector like a thunderbolt. A three-judge bench delivered a ruling that threatened to upend the entire legal framework under which the National Social Security Fund (NSSF) operates, threatening to drag the industry back to the old regime where monthly contributions were pegged at a measly Sh200.
It was a staggering, out-of-the-blue development. What the judges ruled on was a low-stakes, almost-forgotten application for a stay of execution filed by the NSSF way back in October 2022.
This application had languished in the background for years, even as the core disputes surrounding the fund's restructuring were litigated all the way up to the Supreme Court. Yet, from this legal relic, the court conjured up a ruling that ignited immediate panic.
Chaos and confusion quickly rippled through the markets. The NSSF Board was forced to purchase expensive, full-page newspaper advertisements to assure employers and workers that contribution rates remained unchanged.
The Central Organisation of Trade Unions (Cotu) followed suit with its own full-page spread, offering a matching interpretation of the verdict. Days later, Cotu was back in the press with yet another full-page broadside, this time castigating the Agricultural Employers Association after the lobby issued a circular advising its members to immediately revert to the old Sh200 rate.
To truly understand what is at stake here, one must look beyond the immediate news cycle and examine the hard numbers.
According to recent data from the Retirement Benefits Authority (RBA), the NSSF has been collecting billions of shillings from workers since the enhanced rates took effect. As of December 2025, the fund’s net assets stood at a massive Sh623.4 billion.
In the half-year ending December 2025 alone, member contributions reached Sh43.3 billion, closely matching the Sh44 billion collected in the corresponding period in 2024. In the 2024/2025 financial year; the fund paid 17 percent in returns to members.
This phenomenal asset growth is entirely due to the implementation of the NSSF Act, which introduced a graduated scale where lower and upper pensionable salary limits were raised.
Uprooting this framework now would have been an exercise in economic recklessness.
How, for instance, do you deal with retirees who have already exited the system in the last three years and therefore received their payouts under the enhanced tier system? Do you ask them to return the money?
What happens to the thousands of members who opted out of Tier I contributions to join private schemes under the tier 2 arrangement?
Furthermore, the NSSF has already declared and distributed billions in interest to member accounts based on these enhanced collections over the last three years. Reversing this would be an administrative nightmare.
But the ultimate conundrum lies in the investment profile the fund has adopted since its financial muscles grew.
Currently, over 50 percent of the NSSF's portfolio is locked up in government paper and quoted equities.
Over the last three years, the fund has aggressively diversified into long-term national infrastructure.
It is a major local investor in the Rironi-Mau-Summit road project, the anchor investor in the Talanta Stadium bond, a key financier of the Bomas project note programme, and was a cornerstone investor in the recently concluded Kenya Pipeline Company (KPC) initial public offering.
Forcing the NSSF to revert to the old rates would trigger an immediate liquidity crisis and disrupt these mega-projects.The deeper you dig into this ruling, the stranger it gets.
NSSF and Cotu have both accused the Court of Appeal of something almost without precedent: ruling on an application that was not actually before it.
They have maintained that what was argued before the judges on January 23, 2025 was a joinder application by the Kenya Export Floriculture, Horticulture and Allied Workers Union — a union seeking to be added as an interested party.
The October 2022 stay application, which the court purported to rule on, had long since ceased to be a live issue. NSSF has formally asked the court to recall its decision, describing the mix-up as a "monumental error."
Cotu, in characteristically blunt language, suggested the ruling "seems to have been intended to cause confusion."
If the facts are as NSSF and Cotu describe them, then this was not a thunderbolt from a clear sky. It was a thunderbolt from a court that may have been looking at the wrong map.
The writer is a former managing editor of The EastAfrican.
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