The National Social Security Fund (NSSF) has recently been engaging key stakeholders, including the Central Organisation of Trade Unions (Cotu) and the Federation of Kenya Employers (FKE) to seek support for its new Bill.
Among other changes, employees, if the National Social Security Pension Trust Bill 2012 goes through, will have to pay a higher monthly contribution from the current Sh200.
Mugambi Mutegi caught up with the Fund’s acting managing trustee Tom Odongo to get a brief on the proposals and likely impact.
What is the overview of the National Social Security Pension Trust Bill 2012?
The Bill seeks to change the scheme from a provident fund to a pension scheme that handles members from formal and informal sectors. It envisages more benefits.
What does this mean?
Currently, the Fund pays members a lumpsum once they retire, but under the new design it will be monthly.
We propose that 30 per cent is paid at the point of retirement and the balance spread out monthly.
What are the new benefits in the proposed arrangement?
The current monthly subscriptions are not enough to make good savings and we are proposing that the contribution is raised to six per cent of gross salary to be set later with employers matching this amount.
One, it will have a maternity grant where we have suggested female members receive Sh10,000 per child upon delivery.
Discussions are ongoing on birth intervals and the number of children to be covered. The Bill also proposes to raise funeral grant from the Sh2,500 to Sh10,000.
There are complaints by dependants of deceased workers that benefits take long to be released. Explain.
The culture of Kenyans is that when they are employed at between 18 and 25 years, they use name of parents as the next of kin and 30 years down the line, they are yet to update. This is usually a problem since the next of kin is required to present the burial permit for the funeral grant to be processed within 48 hours as well as a death certificate for us to start processing the deceased’s benefits.
So, members should update their lists at least once annually.
Is the NSSF board too heavy with representatives such as Cotu and FKE?
Should this be reduced by half and professional bodies given higher representation to improve governance, which has been a cause for concern? These organisations are not a burden on the board.
The slots given to the employers and the employee representatives are sufficient given the contribution — by virtue of the members they represent. We are considering giving two slots to SMEs and Kenya National Union of Teachers.
The managing trustee’s position appears to be swayed by political interests.
Would security of tenure help ensure continuity in management? NSSF is a sensitive institution with a lot of stakeholder and political interests.
The Act designates the minister as the final appointing authority and this is where the political angle comes in.
What is the remedy?
Currently, the managing trustee serves for a term of three years. If we had a scenario where he/she serves for a fixed term of, say, five years within which he has a strategic plan to implement, it would improve services.
You are holding first AGM in 47 years on September 17. Why did it take so long? The NSSF was politically driven and the managing trustee was appointed by the President and the minister and allegiance was to the two, not the membership.
The knowledge that we will face our members annually to account for how we run the Fund ensures we are accountable.
One of the issues with governance in the Fund is the administration expense. Is it feasible to reduce administration costs to 2 per cent or even lower and how high is it now?
We are enhancing the governance structures to rectify the scenario at the Fund.
The law does not place a ceiling on the administrative expenditure of the Fund. We are currently spending about five per cent of total assets on administrative costs which is pretty high.
In the new Bill, the Fund and the board cannot spend more than 2.5 per cent of all their total assets on administrative costs. This cap will ensure that the fund is managed prudently and efficiently.
As it is now, we are operating with an internal ceiling introduced through our strategic plan in which we are striving to bring down administrative costs down to around 3 per cent by 2015.
What made you to backtrack on the sale of Hazina Towers and View Park Towers?
We stopped the disposal midstream because we received communication from government that they want to purchase them since they have a shortage of offices.
The law allows us to have direct disposal with the government and this is why we halted the tender advert.
We had valued the two buildings at Sh1.8 billion and Sh900 million respectively but the government will conduct its own valuation. If they fail to avail the funds, we will revert to the open market.
We are however compliant with all RBA requirements on how much assets we should own and we got a certificate in October last year. [email protected]
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