Old Mutual and Zimele Pensions Plans have become the latest private pension schemes to receive the approval of the Retirement Benefits Authority (RBA) to handle graduated NSSF contributions.
The pair is expected to handle the contributions known as Tier II through Old Mutual Pensions and Zimele Personal Pension Plan and Zimele Guaranteed Personal Pension Plan.
The pair of private pension providers join other peers in the handling of the higher contributions to the National Social Security Fund including Britam, Octagon Africa, Enwealth Financial Services and CPF Financial Services.
Private pension funds are expected to compete with the State-backed fund on the handling of tier II contributions which relate to deductions above the upper earnings limit of Sh18,000 a month.
Employers opting out from making the higher contributions to the NSSF are expected to also apply to the retirement sector regulator for approval in a contracting out process.
Changes carried out in the 2013 NSSF Act whose implementation began in February unlocked the higher pension contributions which can be remitted by employers to the NSSF or an approved private retirement scheme.
Total remittance under the new contributory system by an employee includes Sh720 in tier II contributory system by an employee includes Sh720 in tier II contributions and Sh360 and tier I contributions (mandatory remitted to the NSSF) with the combined deduction being matched by an employer to Sh1080.
“The milestone marks a significant step forward in our continued commitment in providing comprehensive retirement solutions to our clients,” said Zimele Joint CEO Isaac Njuguna.
The entry of private pension schemes has set the NSSF up for battle with an estimated Sh12.43 billion up for grabs in the financial year starting on July 1.
The tier II contributions are expected to rise to Sh23.82 billion in the fiscal year ending in June 2027 when the 2013 NSSF Act is fully implemented.
Employers are expected to move the tier II contributions from NSSF on behalf of their employees.