Pension and Retirement Benefits in Kenya: Employer Obligations and RBA Compliance

Pension law in Kenya runs on two tracks that employers often confuse. The first is mandatory membership of the National Social Security Fund under the National Social Security Fund Act, 2013. The second is the regulation of occupational and individual pension schemes under the Retirement Benefits Act, 1997, supervised by the Retirement Benefits Authority (RBA). An employer that sets up its own scheme must satisfy both.

Pension law in Kenya: NSSF obligations

Under section 19(1) of the NSSF Act, every employer who employs one or more employees under a contract of service must register with the Fund as a contributing employer and register its employees as members. Section 19(2) makes proof of that registration a precondition of dealing with or accessing public services.

Section 20(1) sets the contribution rate: the employer pays six per cent of the employee’s monthly pensionable earnings, and the employee contributes six per cent of pensionable earnings, deducted from the employee’s earnings. Payment is due on the ninth day of each month or any later date the Board prescribes (section 20(1A)). The Act provides for Tier I and Tier II contributions, and the earnings limits that define them are adjusted over time. Do not rely on a figure you read in an article, including this one. Check the Fund’s current notice for the limits in force before running payroll.

An employer may opt to pay Tier II contributions into a contracted-out scheme under section 21, but it must give the Authority written notice of its intention at least sixty days beforehand and meet the other conditions in that section. Contributions to the Pension Fund at the prescribed rates are a tax-deductible expense under section 67.

Late payment is expensive. Section 27(1) adds five per cent of the amount of the contribution for each month or part of a month it remains unpaid, recoverable in the same way as the contribution itself. Section 55 creates offences, including evading payment of a contribution and knowingly making false statements.

Registering a scheme and its service providers

Section 23(1) of the Retirement Benefits Act requires a person proposing to establish a scheme, or to act as a manager, corporate trustee, custodian or administrator, to apply to the Authority for a certificate of registration and to obtain it before establishing the scheme or starting those functions. Applications are addressed to the Chief Executive Officer, made in the prescribed form and accompanied by the prescribed fee.

A registered scheme’s certificate remains in force until the scheme is deregistered or wound up (section 29(1)). Section 28 deals with deregistration, and section 27 with refusal of registration.

Trustees, funds and investments

Pension law in Kenya protects scheme assets through trust structure. Under section 26(1), every scheme other than one established by a written law must be established under an irrevocable trust. Section 26(2) disqualifies certain people from acting as trustee, including a person sentenced to imprisonment for six months or more, an undischarged bankrupt, a person previously involved in the management of a scheme deregistered for failure on their part, and one who does not comply with the Authority’s guidelines or practice notes.

Section 32(2) requires the scheme fund and all money in it to be kept separate from any other funds under the control of the trustees or manager. Section 37(1) requires every scheme to have a prudent investment policy, with a proviso that a scheme with a fund value of one hundred million shillings or less may invest up to all of its funds in Government securities. Section 40 obliges trustees, managers, custodians and administrators to manage the fund in accordance with the Act and the scheme rules, take reasonable care in the best interests of members and sponsors, and report unusual occurrences that could jeopardise members’ rights to the Chief Executive Officer.

Actuarial valuations

Section 35(1) allows the Board to require trustees of specified schemes to have the scheme evaluated by an actuary and to present the report at intervals the Board specifies. A trustee who misses the deadline pays a penalty of one hundred thousand shillings (section 35(2)), plus a further one thousand shillings for each day or part of a day the report remains unsubmitted (section 35(3)). For a defined benefit scheme, a funding gap exposed by a valuation can translate into higher employer contributions.

Member complaints and appeals

A scheme member who is dissatisfied with a decision of the manager, administrator, custodian or trustees may ask in writing for the Chief Executive Officer of the Authority to review the decision, so that it is checked against the scheme rules or the Act (section 46(1)). A copy of the request must be served on the person whose decision is challenged (section 46(2)).

A person aggrieved by a decision of the Authority or the Chief Executive Officer may appeal to the Appeals Tribunal within thirty days of receiving the decision (section 48(1)). The Cabinet Secretary establishes the Tribunal by gazette order under section 47. The thirty-day period is short, so diary it on receipt.

Practical steps for employers

Under pension law in Kenya, the employer’s checklist is short. First, confirm that the business is registered with the NSSF, that each employee is enrolled, and that contributions are calculated on current limits and paid by the ninth of each month. Second, if you operate or plan an occupational scheme, check that the scheme, and the manager, custodian and administrator, hold the registration the Act requires. Third, keep trustees’ eligibility, investment policy and valuation timetable under review, because the penalties for missing a filing are fixed and accrue daily. Finally, when an employee leaves, check their entitlement against the scheme rules and the Act instead of an assumption. Our article on employment contracts in Kenya explains how benefits should be dealt with in the contract itself.

Frequently asked questions

This article is general information on Kenyan law as at its publication date, not legal advice. Reading it does not create an advocate and client relationship.