Reduce living cost before hiking pension, unions tell state

Coins for saving in an illustration of poor saving culture. [Getty Images]

Workers' unions have opposed President William Ruto's plan to increase monthly contributions to the National Social Security Fund to six per cent of an individual's income rather than the standard Sh200.

Kenya Union of Domestic Hotels, Educational Institutions, Hospitals, and Allied Workers (Kudheiha) said the timing is incorrect because workers are struggling due to high living costs and heavy taxation.

"It's good to save, but with a minimum wage of Sh15,200, our workers can't afford such an increase. Ruto told us to wait a year before lowering maize flour prices; we also want him to give us time and wait for the economy to stabilise," Kudheiha Secretary General Albert Njeru said.

Ruto's administration intends to adjust employee contributions to NSSF to match what they earn, rather than the standard fee of Sh200. Those in formal employment currently contribute Sh200, which is matched by the employer, for a total monthly contribution of Sh400.

Mr Njeru told the media in Nairobi yesterday they will only agree to the President's proposals if the government reciprocates by raising the minimum wage for low-level employees to at least Sh30,000 per month.

"If he can raise our minimum wage, we will allow employers to deduct six per cent from our pay. The deductions must be phased over time and divided into two per cent annual increases."

More deductions

"Kenyans are already in financial trouble. If you start deducting their money arbitrarily, they will have nothing to take home. They will be unable to pay their rent, send their children to school, or live a decent life," he added.

Njeru said the inflation rate is eight per cent and the consumer product index (CPI) is 5.5 per cent. CPI measures changes in consumer prices for a basket of goods and services.

In seeking to increase contributions to the NSSF, the President said it was time for the country to adopt a better saving plan to reduce costly foreign borrowing.

"We cannot continue to borrow from other people's savings. We must build our country with our own money. Allow us to borrow from our own savings in order to pay interest to our own lenders," Ruto recently said during a thanksgiving service at State House.

The country's debt currently stands at Sh8.4 trillion, after Parliament raised the debt ceiling to Sh10 trillion.

"We must leave an inheritance to our children rather than debt, and we must promote a savings culture. That is the only way we can free ourselves from the clutches of our creditors," Ruto said.

However, Njeru argued that if Kenyans are to be deducted more, then the savings should be tax-free. Recently, the High Court halted plans to increase monthly contributions to NSSF and declared the move unconstitutional. Justices Mathews Nduma, Hellen Wasilwa and Monica Mbaru quashed the NSSF Act of 2013, saying it was not subjected to public participation.