Your retirement plan: Pensions, NSSF

There are things we all agree on. Old age is inevitable. We need a plan.We need to think long term and need to start today. Disclaimer:

“Play long-term games with long-term people. All returns in life, whether in wealth, relationships, or knowledge, come from compound interest.” -Naval

As of 2022, there are various ways you can plan for you financial security in retirement.

The rule of thumb remains, save more than what you make, make more money, invest wisely and pray for the wheel of fortune to turn your way.

The constitution of Kenya provides  that every Kenyan has social security. The Retirement benefits Act establishes the Retirement Benefit Authority with the mandate to regulate and supervise the establishment and management of retirement benefits schemes including the NSSF.

Retirement schemes in Kenya can be broadly categories

  • Mandatory / Statutory retirement benefit schemes like the NSSF
  • Occupational funded retirement schemes / Umbrella Retirement Benefit Schemes
  • Individual retirement  Benefit Scheme

The National Social Security Fund

The NSSF Act of 2013 established two funds: a pension fund and a provident fund. The pension fund is mandatory for all workers in the formal sector. The provident fund is voluntary and it will cover self-employed. The pension fund (mandatory) will pay members monthly pensions with the provident fund will make lump sum payments.

Benefits of retirement schemes

  • Contribution to retirement funds like NSSF (National Social Security Fund) is tax exempt up to a limit
  • The regulation assures / guarantees you minimum rate if return each year. Such that your principal will always be safe.
  • Withdraw a maximum of 40% of retirement saving to home ownership
  • NSSF have introduced Tenant purchase Scheme where a portion of the tenant’s monthly rent payments is applied toward the purchase price of the house.

Notes useful links

  1. List of licensed Retirement Benefit Schemes
  2. National Social Security Fund (Kenya)

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