This is how NSSF will manage your Sh30b pension

NSSF Building                PHOTO: COURTESY

By DANIEL WESANGULA

Kenya: The National Social Security Fund (NSSF) has been in cross hairs recently past over implementation of a proposed increment of contributions by workers from a minimum Sh200 to Sh1,080. With this, the fund targets to collect at least Sh30 billion every year, translating to Sh2.5 billion every month.

With the new contributions passed into law, what exactly does the fund plan to do with this money, particularly in light of its history with mismanagement and misappropriation? Although public confidence over NSSF’s ability to manage the colossal sums is minimal, the fund believes it has turned the corner.

“We do accept we had integrity issues in the past, but governance issues have already been dealt with. The current Act and the Retirement Benefit Authority Act will ensure that loopholes in the management of the fund no longer exist,” Richard Langat, the NSSF CEO told The Standard on Sunday.

To date thousands still flock the company headquarters daily chasing after their cheques or those of departed relatives.

Langat says with new systems, NSSF trustees will no longer have direct access to pensioners’ monies.

New systems

However, critics, without faulting the idea behind the increased rates, query the readiness of the fund in handling this rise in collection.

“We cannot fault the nobility of the idea. What we have a problem with are the institutional inefficiencies within the organisation. For instance, for a firm purporting to have Kenya’s best interests at heart, why is it that the last audited books from NSSF date back to 2011,” asks William Maara, the Association of Retirement Benefits Schemes Secretary General.

“Their accounts, which are public documents, cannot be accessed.”

But what will a bigger and richer NSSF do with the 2.5 billion monthly reserves? Will service delivery at their claims office be faster in light of numerous complaints by pensioners over delays and untraceable pensions?

“We have installed new systems to spend less time dealing with disbursements. By September, it will be fully operational. These are some of the things we have put in place to seal these loopholes,” Langat says.

But Maara says that even if the loopholes are sealed, a lot more will have to be done.

Before enactment of the Bill into law, Langat says there were wide consultations with employers, government and trade unions; a position that Knut Secretary General Wilson Sossion denies.

  More deductions

“We were never involved in the drafting of the Bill. From our point of view, it has many technical loopholes and teachers will not contribute unless we go through a collective bargaining process,” says Sossion.

 He says teachers have a pension scheme and there is no need for another that will subject them to more deductions from their pay slips.

“If they deduct it from our pay slips then that will be seen as an affront and will be an invitation for unrest from us,” he says.

 The Central Organisation of Trade Unions (Cotu), through an affiliate member, on Friday lent their dissenting voice to the contributions debate.

“It is ridiculous that at a time when the NSSF is under investigation from various government investigating agents, the Cabinet Secretary Ministry of Labour, Social Security and Services is busy pushing for workers to start contributing under the new scheme. We are determined to go extra mile in ensuring none of our members’ hard earned cash goes to a fund riddled with massive theft and corruption,” read a statement from the Kenya Union of Domestic Hotels, Education Institutions and Hospital Workers.

Late last year, Matungu MP David Were tabled an amended NSSF Bill on the floor of the National Assembly. From his position as chair of the House committee on Labour and Social Welfare, he says the increased contributions are a welcome thing for the majority of Kenyans.

“The Act was something whose time had come…the issues raised are valid and we cannot completely rule out corruption… but we must start somewhere. If the law is followed to the letter, then it will be a good thing,” Were says.

Statistics from the Retirement Benefit Authority show there are at least 1,217 retirement schemes in Kenya in a sector worth Sh522.6 billion as at June 2012. Of this, only Sh110.9 billion is held by the NSSF, while the remaining Sh412 billion is held by occupational schemes run by fund managers.?

 Optional contribution

If the government-supported fund meets its annual projections, it will, in a few years, be among the biggest players in the pension’s services sector. What does this mean to other pension funds in the country?

“There will be little effect to the existing pension schemes. As the regulator in the industry we have negotiated an opt-out agreement with all parties involved. From June 1, when the changes to minimum contributions are effected, employers and contributors will have an option of opting out of the NSSF scheme,” Retirement Benefits Authority CEO Edward Odundo said.

Odundo says Kenyans will only pay for the first month after which their contributions will continue to be remitted to their schemes of choice. It is only those with no retirement scheme who will be obligated to contribute to NSSF.

“If the overall idea was to make Kenyans save for a retirement fund, then the government should have made it mandatory for employers and employees to contribute to a pension scheme of their choice and not force NSSF down the throats of Kenyans,” Maara says.

He argues there are private schemes with bigger returns on investment compared to NSSF. “Their investments earn an average of five per cent which is even below the rate of inflation. Of what gain will this be to the pensioner,” he argues.

NSSF however say their fund, through different platforms, returns an average of 24 per cent.

“We no longer even handle the money. All contributions from members go to professional fund managers who invest this money in real estate, hedge funds and other sectors. This will enable us get more returns for our members,” Langat says.

The debate on the technicalities of the increment and the fund’s dubious past make little sense to pensioners trying to cash their benefits.

The latest being the controversial Tassia Estate housing project which allegedly had a flawed tendering process.

Special mortgage

The project was the subject of controversy after Cotu chair Francis Atwoli blew the whistle alleging that the insurer would lose billions of shillings if it was given a go ahead.

NSSF insists things will get better. A pension scheme for those in the diaspora is running, and it says negotiations are ongoing on the possibility of having a special mortgage facility for the majority of its members on the minimum contribution scale.

“We ask Kenyans to give us time. NSSF has the ability to transform their retirement,” Langat adds.