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Private schemes keep Sh15.3bn as firms transfer higher NSSF deductions
Private pension schemes were wary of NSSF’s crippling effect at the start of the implementation of the NSSF Act of 2013, which began in February 2023 and commenced with slow approvals for contracting out.
Private schemes retained Sh15.3 billion in pension contributions as of December 2025, amid increased approvals to transfer higher National Social Security Fund (NSSF) contributions to employer-sponsored retirement schemes.
Data from the Retirement Benefits Authority (RBA) shows 5,523 employers have transferred the higher deductions from the NSSF to their respective sponsored schemes since July 2024, a process known as opting-out.
Over the period, an estimated Sh1.28 billion was ‘opted-out’ monthly under the tier II contributions, with total haul of ‘opted-out’ funds standing at Sh15.39 billion.
The retention of the deductions in private pension schemes marks some respite for the funds that feared being cannibalised by the State-run NSSF.
Contributions to the NSSF fell slightly by 3.05 percent in the second half of last year as more than 2,000 employers opted out of the higher deductions in the period.
“The drop in half-year contribution could be attributed to opting out of schemes that were previously remitting their tier II contributions to the statutory scheme,” RBA said in an industry report.
The smaller proportion of NSSF deductions covering both the employer and employee, which represents six percent of lower earning limits, also known as the tier I contribution, must be submitted to the State-run fund.
The RBA, however, allows higher deductions known as Tier II, which rises to six percent of the upper earnings limit to be contracted out to an employer’s own occupational pension scheme.
Such employers must, however, seek certification from the RBA to transfer the upper-tier contributions.
For an employee grossing Sh108,000 currently, Sh540 of their NSSF deduction must go to the NSSF, but their employer, with the RBA nod, can channel the additional Sh6,480 deduction to their in-house occupational pension scheme.
Private pension schemes were wary of NSSF’s crippling effect at the start of the implementation of the NSSF Act of 2013, which began in February 2023 and commenced with slow approvals for contracting out.
The private schemes lamented that the NSSF had interfered with the opt-out process, forcing some employers to scale down and even discontinue their existing schemes to avoid additional/higher cost burdens.
Both employers and the managers of occupational pension schemes require RBA’s contracting out certification to opt out and receive NSSF’s tier II deductions, respectively.
As of November 2024, the RBA had cleared 84 private pension schemes to handle the tier II contributions, including CIC Life Assurance, Octagon Africa, Enwealth Financial Services, Britam, CPF Financial Services, Zimele, and Old Mutual.
The bulk of deductions still flows to the State-managed fund, with contributions to NSSF rising to Sh88.1 billion in 2025 from Sh72.8 billion in 2024.
NSSF’s total net assets reached Sh623.79 billion in December 2025 from Sh453.8 billion a year prior.
Externally managed assets for the NSSF reached Sh589.2 billion in the same period from Sh424.5 billion previously.
The NSSF has three external fund managers, including Genafrica Asset Managers Limited, Africa Alliance Kenya, and Co-optrust Investment Services Limited.
