Why employers are turning to Old Mutual for NSSF Tier II

This February, many Kenyan employees will notice higher deductions on their payslips as the government implements the fourth phase of National Social Security Fund (NSSF) contributions under the NSSF Act, 2013. For many households, this feels like yet another deduction at a time when disposable incomes are already stretched. The instinctive reaction is to see Tier II as a reduction in take‑home pay. However, Tier II is not a loss; it is part of your long‑term retirement savings.

NSSF Tier II should be viewed as a deferred income, your personal retirement savings, invested on your behalf, and because these contributions are mandatory, both employers and employees should take a close interest in how and where this money is invested. This ultimately shapes whether retirement is lived with dignity and independence or with financial strain. For employers, Tier II shifts from being a payroll task to a strategic decision about the long-term financial well-being of their workforce.

What is NSSF Tier II?

The NSSF Act, 2013, transitioned Kenya from a flat-rate contribution model to an earnings-based system.  Statutory pension contributions are now set at 6% of pensionable salary from the employee and 6% from the employer, and split into Tier I and Tier II. Tier I must remain with NSSF.

Tier II, which represents a larger part of the contribution for most employees, may be redirected to a licensed private pension scheme through a formal process known as Contracting Out. This, therefore, means that employers can channel Tier II into Retirement Benefits Authority (RBA) approved schemes, giving members professional fund management, stronger governance, transparency, and potentially better long-term outcomes.

By 2026, total monthly statutory contributions for employees in upper bands will reach a maximum of KES 6,480, of which only KES 540 is allocated to Tier I, while approximately KES 5,940 flows into Tier II.  That means most statutory pension savings will sit in Tier II, making investment decisions far more consequential.

Why Tier II is a Strategic Financial Decision

Under the old NSSF flat-rate model, employees contributed about KES 200 per month, matched by employers. Over a year, that was roughly KES 4,800. Over a 30-year working life, total contributions amounted to about KES144,000 before investment returns, which was insufficient to provide meaningful income replacement in retirement. This explains why many retirees still face financial vulnerability.

Today’s earnings-based system changes the equation entirely. Statutory pension saving can now exceed KES 155,000 per year. Over three decades, that is more than KES 4.6 million in contributions before investment growth.

When invested prudently and compounded over time, this can significantly replace income in retirement. This is therefore why Tier II is strategic, not just administrative. The amounts involved are too substantial to leave to default arrangements. Governance quality, investment discipline, minimal fees, transparency, and service quality all compound into vastly different outcomes over 20 to 30 years.

Why Old Mutual Delivers Better Outcomes

A pension scheme delivers stronger retirement outcomes when three fundamentals are done well: strong governance, disciplined investment management, and a member experience that builds confidence and engagement over time. These are the drivers of real financial security in retirement.

Old Mutual Life Assurance Kenya is anchored on these pillars, backed by the depth and financial strength of the Old Mutual Group, which manages over KES 12 trillion worth of assets across Africa. This scale is not just a number; it reflects deep institutional capability, robust risk management frameworks, and proven stewardship of long-term savings across multiple markets and economic cycles.

At a local level, Old Mutual manages over KES 300 billion in assets in Kenya, reflecting strong market confidence in our ability to safeguard and grow members’ retirement savings. Our investment teams manage diversified portfolios through market cycles, balancing growth and capital preservation to deliver long-term value. Strong governance frameworks, transparent reporting, and regulatory-aligned controls ensure members’ savings are protected with accountability and discipline

Equally important is how members experience their pension. Through secure digital platforms, regular reporting, ongoing financial education, and responsive administration, Old Mutual ensures that members remain informed and engaged with their savings. When members understand their pension, they are more likely to value, protect, and commit to their financial future.

Our heritage of over 180 years as a Group, and more than a century in Kenya, brings continuity and stability to long-term retirement planning. Our end-to-end retirement solutions span contracting-out support, employer and member education, and structured post-retirement income options, ensuring continuity of care across the full retirement journey.

For employers, this goes beyond compliance. The workplace pension is often the largest financial asset an employee will ever own outside of their home. Choosing a pension partner is therefore not just an operational or procurement decision, but a leadership and values decision. It directly shapes employee wellbeing, long-term financial security, and trust in the organisation.

To learn how you can strategically maximise your NSSF Tier II benefits, you can WhatsApp Chat us https://api.whatsapp.com/send?phone=254791197612 or SMS 'NSSF Tier II' to 22801, call 0711 065 100 or send us an email to [email protected].

Whether you're an employer or an employee, our team is ready to guide you.                                 

The writer is the Managing Director, Old Mutual Life Assurance Kenya