Daudi was quick to point out : “ The proposed 6 % NSSF increase will be the beginning of impoverishing employees in the pretext of a better life in retirement . The incremental move , which has not been subjected to public participation , would be tantamount to solving a future problem by creating a current one .”
On my part , I was concerned about the impact the proposed NSSF increase will have on not only the pension industry but also the uptake of investment instruments such as shares and Treasury Bonds . I wondered loudly : “ Would this be the beginning of destroying our vibrant pension industry ? Job losses will be in the offing and activities on the Nairobi Securities Exchange will be reduced .”
Disband NSSF
Angela , who seemed disturbed with the consequences which I had outlined , asked : “ What should be done to avert the longterm potential economic catastrophe if the proposed increase was implemented ?” I scratched my bald head and said : “ Let the decision makers have as many options on the table before settling on the best one . For instance , determine a fixed amount of increase that is not begged to the basic salary . Or disband NSSF and make it mandatory for employers to operate contributory pension schemes with a statutory minimum contribution rate of at least 7.5 % by both employee and employer .”
NSSF Scandals
Daudi digressed from the discussion by saying : “ A factor we have not considered in clamoring for a 6 % increase is the capacity of NSSF to administer the potential huge sums of money that shall flow into its coffers .” He pointed out that the history of NSSF is tainted with financial scandals , some of which have not been resolved to date . He also queried : “ What assurance will NSSF in its current structure give the contributors that their contributions will be intact when due ?”
My immediate reaction was that NSSF will need thorough restructuring before any approved increase in contributions . I mulled over whether or not NSSF would provide better services if it operated under the RBA rules and regulations like other players in the pension industry .
Co-ownership Scheme
After clearing his throat , Daudi lectured to Angela and I : “ NSSF has over time invested in a variety of investment instruments to facilitate payment of benefits to its members . Some long-term investments , such as rental properties , generate revenue to NSSF long after the retirees have been paid their benefits .”
He continued : “ Taking into account that the retirees ’ money was used for the investments , NSSF should consider
developing a lifetime co-ownership scheme with its members . This scheme alone would encourage employees to substantially increase their NSSF contributions without enforcing a 6 % statutory limit .
Pyramid Bottom
On the positive side and for the sake of those at the bottom of the pyramid , I told my friends : “ A restructured NSSF should develop and market a variety of pension products targeted at owners of micro and small businesses in our growing informal sector .
I concluded : “ Any reasonable increase to NSSF contributions would be a game changer if the final payout will be converted into draw downs or annuities . Otherwise , the social welfare statutory contributions have elsewhere been termed as an infringement of employees ’ right to choose preferred pension schemes .”
As we were about to leave the Zoom meeting , Daudi quipped : “ The government should develop policies that would encourage other players in the pension industry to develop pension products for people in the informal sector .”
Samson Osero is an Independent Human Resource Development Consultant and Author of the book ‘ Transition Into Retirement ’. You can commune with him on this or related matters via email at : Samsonosero @ gmail . com .
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