HR laud new NSSF rates for bid to entrench saving culture among Kenyans

  • 17 Mar 2023
  • 2 Mins Read
  • 〜 by Mercy Kamau

While Kenyans decried the implementation of the new National Social Security Fund (NSSF) rates, Ms. Audrey Kagwiria, a Human Resource Officer, has lauded the move saying it is the best move as it will encourage Kenyans to cultivate the saving culture which many lack.

In an interview on Tuesday, March 14, 2023, Ms. Kagwiria, however, decried the fact that the implementation was done in haste and no clarifications were done in advance. 

Further, she said employers and human resource personnel were left with questions and didn’t quite understand the ambiguity in terms of consequences and hence that paused a challenge to them. Upon research and seeking clarification from relevant bodies, this was resolved.

Both employees and employers started feeling the impact of the new pension contribution rates last month after the NSSF asked employers to comply with the law raising monthly contributions immediately. 

How did the implementation of the NSSF Act 2013 affect employers and employees? What are the new NSSF rates?

Previously, a section of Kenyans were contributing Ksh. 200 per month, which adds up to about Ksh. 72,000 over 30 years. The proposal was meant to move the average Ksh. 200 to Ksh. 2,160 or about 5.6% of an employee’s monthly salary. Notably, the employer should match the same.

“It is a good approach to encourage a saving culture that a section of Kenyans does not have,” Ms Kagwiria said in the interview.

“When retiring, one will now go home with a significant amount that will be resourceful,” she noted.

According to an analysis done in 2021, Kenyans saved the least in East Africa and the saving rate is below the continent’s average, an analysis by EFG Hermes shows.

According to the report looking at different investment options in the country, Kenya’s saving rate was at 12 percent, way below Africa’s average of 17 percent.

“Kenyans are well connected to the world, thanks to both high mobile phone and internet penetration. Most young people tend to copy expensive lifestyles in the West, hence high spending power,” the report said.

The report further showed a correlation between saving culture and happiness. Nordic countries such as Finland, Switzerland, Norway, Iceland and Denmark, with a high saving rate, are leading in the global happiness index. 

In 2020, a UN survey ranked Kenya at 121 out of 156 countries in terms of happiness. It noted that the happiness index in the East African nation was just 4.583 out of a scale of 10. The five Nordic countries had happiness indices above 70 percent, with Finland leading at (7.842), Denmark (7.620) Switzerland (7.571), Iceland (7.554), Netherlands (7.464) and Norway (7.392).

With the inflation and increased prices of basic commodities, a section of Kenyans might not be able to save as much as they would want. Experts have called on the government to develop broad policies that will cover other savings instruments aside from social security that will provide financial security and promote savings in the long run. This will help improve Kenya’s economic situation because it would mean more money will be available for investment translating to more jobs.