By Jackson Okoth
The Retirement Benefits Authority (RBA), the regulatory organ in the pensions industry, has urged for caution and more time to discuss key proposals contained in the draft National Social Security Pension Trust Bill, 2012. The new proposal seeks to transform NSSF from a provident into a pension fund.
“We need to deal with serious legacy and corporate governance issues facing the NSSF before we can even start to think of changing the law governing its operations,” Edward Odundo, the RBA chief executive officer told Business Weekly.
While those behind the new NSSF draft Bill are pushing an October 2012 deadline for discussions among stakeholders to be completed before a final document is placed before Cabinet for approval and Parliament for debate, there is a feeling that the timing is poor and suspect. This is so, especially when the country is preparing to go to the polls.
“We run the risk that a parliament whose concentration levels is now low, could pass the NSSF Bill without serious scrutiny and consideration on its implications on the employer and the economy or even the administrative cost of the new scheme,” cautioned Odundo.
In the new NSSF, it has been proposed that employees will contribute 6 per cent of their basic salary to the fund, up from the current Sh200 deducted each month. The employer is expected to contribute another 6 per cent bringing total contributions to 12 per cent. This calculation is based on the average wage balance.
“It is still unclear how the 6 per cent was arrived at. With no cap placed on this percentage, there could be serious implications on balance sheet of companies as they adjust contributions each time the average wage changes,” said Odundo.
While occupational schemes are thriving in Kenya, fears have already been expressed that an expensive state pension scheme could force employers to shut down their own, exposing employers and workers to unforeseen economic and social landmines.
Experts in the pension business suggest formulation of a national social security policy instead, with the NSSF being only one of the pillars, its role confined to providing cover and a safety net to vulnerable segments of the society.
Under the new NSSF Bill, a fine of Sh200,000 or a jailterm not exceeding three years or both is proposed for any employer who fails to remit monthly deductions to the fund.