Kenya’s Largest Pension Fund Wins Ruling to Raise Contributions

Kenya’s largest pension fund won a court ruling allowing it to increase monthly contributions after being unable to do so for more than nine years due to legal challenges.

(Bloomberg) — Kenya’s largest pension fund won a court ruling allowing it to increase monthly contributions after being unable to do so for more than nine years due to legal challenges. 

The Court of Appeal ruled that legislation that would have let the National Social Security Fund to set contributions at 6% of workers’ monthly pensionable earnings with a payment matched by their employer from Jan. 10, 2014 is legal and can be implemented — overturning a previous order.  

The decision will provide members the opportunity to enhance their savings, NSSF said in a statement. Before the ruling increasing contributions above a 200 shilling ($1.60) per month cap matched by employers was voluntary.

The increase should help the state-run fund improve its solvency ratio and grow assets. 

NSSF’s net assets climbed 14% from a year earlier to 284.5 billion shillings  in the 12 months through June 2021. Net return on investments grew 2.4 times to 32.7 billion shillings, the second straight year of growth. About 57% of the portfolio is held in government securities, 25% in stocks, 13% in real estate.

Still, while the amount of contributions will increase, it raises business labor costs and doesn’t address operational inefficiencies at the fund, said Rufus Mwanyasi, chief executive officer of Nairobi-based Canaan Capital.

Apollo Kiarii, CEO of the Kenya Tea Growers Association, said the organization is reviewing the judgment and “seeking legal advice on the next course of action.” The lobby group was one of 15 respondents that challenged the legislation.

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