William Ruto savings drive could cost State up to Sh46bn annually

President William Ruto is escorted out on National Assembly chambers by Speaker Moses Wetangula and his Senate counterpart Amason Kingi during the opening of the 13th Parliament on September 29, 2022. [Boniface Okendo, Standard]

President William Ruto's plan to top up savings for informal sector workers up to Sh3,000 could cost the government at least Sh45.78 billion.

Dr Ruto wants his administration to start topping up a shilling for every Sh2 saved by informal workers in their pension schemes.

"I will be proposing a national savings drive to encourage those in the informal sector to set up their retirement savings plan," said Ruto during his inaugural address to Parliament.

"For every Sh2 saved in the scheme, up to a maximum of Sh6,000 a year, the government will contribute Sh1."

The idea will mirror that of formal sector workers where private sector employers match the monthly Sh200 that workers contribute to the National Social Security Fund (NSSF).

Formal sector employees also save a certain percentage of their salaries in pension schemes, which employers also match, thus helping them secure their retirement income.

The President's proposal, which is part of a planned overhaul of the social security infrastructure, could cost his administration up to Sh45.78 billion, going by the official number of informal sector workers.

Kenya National Bureau of Statistics data shows the number of Kenyans working in the informal sector has averaged 14.53 million in the past five years, closing 2021 at 15.26 million.

If all these workers start saving at least Sh6,000 a year-equivalent to Sh500 every month-the State will require Sh45.78 billion to run the programme.

The Sh45.78 billion is close to the Sh50 billion that Dr Ruto wants to pump into the Hustler Fund every year to support informal sector businesses.

The President decried the current contribution of Sh200 a month to NSSF for formal sector workers, saying it amounts to Sh72,000 in 30 years "which is meagre and cannot sustain one in old age."

NSSF had 2.5 million members by end of June 2021 with assets valued at Sh284.49 billion. It paid out Sh5.8 billion as benefits in during this period.

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