For nearly six decades, the National Social Security Fund (NSSF) has been a crucial component of social protection as a contributory scheme offering social security benefits to its members and their dependents once they reach retirement age.
However, a 2021 FinAccess Household Survey Report indicated that only 10.6 per cent of households have access to pension services, including NSSF.
This means that 89.4 per cent of Kenyans lack a financial nest for their retirement, which poses the risk of old-age poverty.
Pension funds are retirement arrangements designed to help individuals build a nest egg for their golden years. While it may be tempting to put off saving for retirement until later years in life, the earlier one starts, the better off one will be in their later life.
Most people will spend at least 20 years in retirement, and with the cost of living on the rise, it is crucial to have adequate savings to rely on during the golden years.
The recent High Court ruling on the NSSF Act Number 45 of 2013 will see employers increase remittances from Sh200 to the high of 1,080 under a graduated scale with the upper limits on contributions expected to rise every year.
Employers are expected to remit Sh2,160 for all earners with a gross income of Sh18,000 and above, half of which is a matchup by the employer for the employee contribution.
While the ruling has elicited mixed views, employers and employees stand to benefit when implemented.
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First, even though employees will see their deductions increase, they are the ultimate beneficiaries of better retirement perks at maturity.
This means improved livelihoods for retirees who have had to rely on measly gratuities to keep them afloat -- who wouldn't want that.
Secondly, organisations stand to benefit from a motivated workforce whether through NSSF contributions or a private pension plan.
These contributions from employers demonstrate their commitment to their employees' long-term financial security.
Thirdly, the ruling presents an opportunity for the government and private pension schemes to conduct financial literacy programs to instil the savings culture in both the formal and informal sectors.