State-run pension scheme, the National Social Security Fund (NSSF), has increased interest payable on retirement savings to seven per cent for the year ended June 2017 on the back of a sharp rise in net investment income.
The return is a rise from the six per cent posted in 2016 and three per cent it paid on savings in the year to June 2015 — marking a rise for the three years in a row.
This was helped by the rise in net investment income to Sh20.4 billion in the year to June 2017 from Sh1 billion a year earlier aided by dividends from firms where the fund has stakes, trading of shares and bonds at the Nairobi Securities Exchange (NSE).
The payouts are expected to be credited to contributors accounts following the publication of the higher yields in a gazette notice on November 23. The payment comes as the government steps up its drive to have more Kenyans secure their financial health in old age with retirement savings.
The majority of senior citizens have been suffering in old age without financial fallback plans, prompting the State to intervene.
The government has set aside Sh6.5 billion to give those above 70 years a monthly pay and free medical cover, irrespective of their income level.
The higher NSSF payout came as workers’ contributions to the fund increased 5.4 per cent to Sh13.5 billion and it paid out Sh3.6 billion to those retired. This means that NSSF was left with Sh9.8 billion to invest on behalf of pension savers in 2017, up from Sh9.7 billion a year earlier.
The NSSF net assets grew 14.2 per cent in the period to Sh196.5 billion, from Sh117.2 billion the year earlier — making it Kenya’s largest pension scheme.
Treasury bonds top the list of asset classes that the NSSF has invested in to generate returns for its members.
The fund raised its appetite for the bonds investing Sh64.1billion last year, a 21.6 per cent growth from Sh52.7 billion in 2016.
Its investments in companies listed on the Nairobi Securities Exchange such as KCB, Barclays, BAT and Safaricom increased by Sh3.6 billion to Sh53.2 billion, allowing the fund to benefit from a healthy flow of dividends. The fund also sold and bought new shares, allowing to book capital gains as investments.
The new NSSF law converted the hitherto provident fund into a pension scheme and raised monthly fees equally met by workers and employers to a high of Sh18,450 from the current Sh400. The new rates are yet to take effect due to a court case.