In an effort to increase national savings, the government has announced measures to match pension contributions made by the unorganized sector.
According to the proposal, the National Social Security Fund (NSSF) could be reorganized, and government payments to retirement savings would be matched by the government by 50%.
According to President William Ruto, under the new framework, the government will pay up to Ksh.3000 per year, or Ksh.250 per month, toward each citizen covered by the new structure's savings requirements.
"We plan to restructure our social security system to be more inclusive and to encourage individuals who aren't covered to save. To entice those working in the unorganized sector to establish their retirement savings plans, I will suggest a national savings campaign. The government will donate one shilling for every two shillings saved in the program, up to a maximum of Ksh.6,000 each year, according to President Ruto's announcement on Thursday.
President Ruto reiterated earlier comments in his speech to a joint session of Parliament in which he criticized the present savings system for being "unhelpful" to Kenyans, particularly those working in the informal economy.
"Today, no retired Kenyan is surviving solely off of NSSF retirement income. Over the course of 30 years, the meager monthly contribution of Ksh. 200 amounts to Ksh. 72,000. President Ruto continued, "There is no rate of return on earth that could grow this into a sufficient pension.
"Kenya has to invest at least 25% of its GDP in order to develop into an upper middle-income nation. Our country currently saves less than 10% of its GDP, which results in a 15% GDP shortfall between investments and savings.
As of right now, statutory withdrawals from legally employed Kenyans must equal at least Ksh. 200 each month for retirement through the NSSF.
Workers in the informal sector are now required to voluntarily save for their retirement through private pension plans or the NSSF.
The 2013 NSSF Act's attempts to increase the required pension contribution from its current level of Ksh. 200 failed since the Senate was unable to pass the Act, which resulted in the amendment being ruled invalid and impossible to enforce in court.
Only 2.55 million Kenyans are active members of the Fund, which received Ksh. 14.7 billion in member contributions during the fiscal year that ended in June 2021, according to official figures from the NSSF.
Just Ksh.5.8 billion worth of rewards were given to members by NSSF throughout the fiscal year. Kenyans are free to increase their NSSF or other pension plan contributions.
However, in an effort to increase the nation's savings rate, the government has previously considered increasing mandatory payments and requiring employers to match the contribution.
Kenya now has a national savings rate that is less than 10% of GDP.
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