Seventeen Life Insurance companies authorised to receive NSSF Tier 2 contributions.
The Retirement Benefits Authority (RBA) has given approval to seventeen Life Insurance Companies to receive NSSF Tier 2 contributions.
This approval follows the implementation of the National Social Security Fund (NSSF) Act, 2013. The objective of this Act is to review and enhance the minimum rate of contributions that will guarantee better accumulation of funds and thus better benefits at retirement.
One can save for retirement through a private retirement benefit scheme, through employer specific schemes or through the National Social Security Fund (NSSF).
All employers are required to comply and remit the new NSSF contributions as prescribed in the Act.
New NSSF contribution rates
The NSSF Act, 2013 prescribes that a total of 12% of an employee’s pensionable earnings will be remitted to NSSF monthly. This figure will be made up of 6% being employee contributions and 6% being employer contributions.
The contributions have been categorized into two tiers to accommodate different earning brackets which will increase progressively over a period of five years.
Tier 1 caters for the lower earnings limit set at Ksh6,000. The 12% then translates to Ksh720 broken down to Ksh360 from the employee and Ksh360 from the employer. This will apply to those earning between Ksh6,000 and Ksh18,000.
Tier 2 contributions will apply to those earning Ksh18,000 and above. The 12% then will translate to a total of Ksh2,160. For those employers who would wish to contract out, the Tier 1 contribution of Ksh720 must be remitted to NSSF Pension Fund while the balance, Tier 2 of Ksh1,440 can be contracted out to a private pension scheme.
Tier 2 Contracting out option for employers.
Through the NSSF (Contracting Out by Employers) Regulations, 2014, employers are allowed to contract out Tier 2 contributions and remit the funds to a private registered scheme which can be an occupational scheme, Umbrella Scheme or Personal Pension Scheme. The Regulations also outline the opting out requirements that employers must meet.
To opt out, employers must get approval from the Retirement Benefits Authority (RBA) which licenses and regulates the private schemes that receive the Tier 2 contributions.
Some of the contracting out requirements employers must submit to the RBA are;
- A duly filled form C1 available on the RBA Website
- An employer resolution to contract out Tier II contributions.
- Copy of the written notice issued to employees (As per Regulation 5 of NSSF contracting out by employers Regulations)
- Employer undertaking to meet the obligations on minimum contributions as per NSSF Act.
Detailed requirements per scheme type is available in the RBA website https://www.rba.go.ke
The Life Insurance Companies authorized by RBA to receive the NSSF Tier 2 contributions are listed here