The Retirement Benefits Authority (RBA) has cleared 84 private pension schemes to handle National Social Security Fund (NSSF) tier-II contributions.
The nod has set the stage for the private pension schemes to battle the NSSF for the control of billions in new pension contributions created from the implementation of the 2013 NSSF Act whose implementation began at the end of February.
“84 registered retirement benefits schemes have been approved to receive tier II contributions as at June 21 in accordance with the provisions for a reference scheme test in the fourth schedule of the NSSF Act 2013,” RBA chief executive Charles Machira told the Business Daily.
Among schemes cleared by the regulator include CIC Life Assurance, Octagon Africa, Enwealth Financial Services, Britam, CPF Financial Services, Zimele and Old Mutual.
An employer is empowered to choose to pay tier-II contributions to a private pension scheme or the NSSF.
The tier-II contributions are secondary deductions made by persons with incomes above Sh18,000 at Sh720 a month with the contribution being matched by employers.
Tier-I contributions, which are set at Sh360 a month and matched by the employer are mandatory and remitted to the NSSF.
Tier-II contributions have been estimated to yield Sh12.43 billion in new pension funds during the first year of the 2013 NSSF Act implementation up to June 2024.
Just like private retirement schemes, employers are also required to apply to the RBA to channel contributions outside the NSSF.
According to the RBA, more than 300 employees have so far applied to opt-out making the secondary contributions to the NSSF with the regulator giving the nod to 163 of the applicants by issuing them with contracting out certificates.
The RBA notes the demand for clearance for both retirement schemes and employers has been high with the regulator easing concerns over the dominance of the NSSF over private pension schemes in the control of pension contributions.
“The Retirement Benefits Authority appreciates that the implementation of the 2013 NSSF Act is a win-win situation. We have continuously advocated for increased contributions to schemes to address concerns on the adequacy and to provide higher income replacement rates. The NSSF Act has recognised employers who have supplementary schemes and has provided for a partial opt-out by employers to ensure the schemes are not crowded out,” said Mr Machira.
The RBA expects employers with supplementary schemes to continue applying to the regulator to channel the tier II NSSF contributions into their own schemes.
