The National Social Security Fund (NSSF) has made moves to establish a bill that will provide pension schemes for all Kenyans across the board. According to Kenya College of Accountancy (KCA) University Chancellor, Prof Arthur Eshiwani, the proposed statement will give members of the informal sector a chance to register for legitimate pension schemes.
Speaking during the NSSF Transformation Bill breakfast at the Serena Hotel, Prof Eshiwani gave an overview of the proposed document, bringing various concerns to light.
Life Time Retirement Plan
One of the new amendments to the existing regulations is that the fund will change its name to the Trust and will be comprised of a Provident Fund Scheme as well as a Pension Fund Scheme. The proposal states that instead of a one-off lump sum for pension holders, the Trust will also offer the choice of a life time payment plan for its members.
Changes to the Board of Trustees
The proposal also states that the NSSF Board of Trustees will have more functions in relation to Corporate Governance. This means that they will offer leadership and strategic direction to Fund Managers on top of their current responsibilities.
The Board, which currently serves for an unlimited term of appointment, will be entitled to a five year term under the proposed bill. Board members can then be reappointed for one more final term.
On top of this, the proposed amendment states that the Board will be accountable to the Minister/Cabinet Secretary and the Members of the Trust. The current legislation does not explicitly mention accountability of the Board.
Independent Fund Managers
Despite the increase in responsibilities, the proposed bill highlights the fact that the Trust will be handled by independent Fund Managers. They will be responsible for investing the pensions on behalf of all the parties involved.
Pension Scheme Acturian, Sandeep Riachura noted that the Fund Managers will ensure a return of at least 4% above the overall rate of inflation. He said that the Board of Trustees will only intervene if the Fund Managers fail to meet this quota.
6% Monthly Contributions
One other matter of concern is the Board’s proposal to increase monthly NSSF contributions from the current maximum of KES 400 to 6% of contributor’s total income. The employer and the employee will each contribute 6% adding to 12% of the pensionable earnings.
Unemployed Pension Plan Holders
For unemployed members who would like to apply for a pension scheme, the Trust will allow a minimum monthly contribution of KES 200. According to the NSSF press release, this will provide basic benefits for the voluntary member.
Investment Decisions
Investment decisions are currently vetted by the Minister of Finance. The proposed bill ensure that all investment decisions are made according to a set of guidelines mentioned in the Retirement Benefits Act (RBA).
Publication of Audited Results
The Board has decided that the new bill will ensure that Trust accounts publish their results in at least two daily newspapers within one month of the auditing process.
Liabilities
Liabilities and damages are not catered for in the current retirement plan. The amendment will insure that the pension holder is compensated in case of any losses, damages or injuries sustained within the guidelines mentioned in the Trust.
Administering the Fund
When paying for pension fund returns, the Board of Trustees receives a ablnk cheque with no limit on the amount to be disbursed. The new legislation will ensure that expenses do not exceed 2% of the Trust’s total Assets.
In response to this among other suggestions, Federation of Kenya Employers (FKE) Chairman, Erastus Mwongera said, “We support the Act because it addresses the social needs of Kenyans.” He noted that current pension schemes barely saved enough money for some Kenyans to live out their retirement.
Penalties
The current provisions allow a fine not esceeding KES 20,000 for offenders who fail to make contributions. The new provisions will allow a fine not exceeding KES 200,000 ar a jail term no more than 3 years or both. Other disputes can be resolved by a Tribunal.
“We are happy with the proposals that have been given”, said Mwongera. He noted that the Board would give employers as well as employees a chance to chance to air their concerns if they are not satisfied with the plan. He also pointed out that it was a zero draft and was pending an approval from Parliament.
Prof Eshiwani assured the public that the proposed bill was just a zero draft. He said, “Let us first provide basic social security, then those other matters can be resolved later.”