RBA eyes policy reforms to up contributions

Pension regulator, the Retirement Benefits Authority (RBA) has set its eyes on the informal sector as it seeks policy reforms to increase contributions, amid an improved pension assets to gross domestic product (GDP) ratio.

Latest numbers show the pension assets to GDP ratio slightly went up to 14.6 per cent in the year ended December 2024, from 12.2 per cent for the year ended December 2023.

Amid the increase, which can largely be attributed to enhanced National Social Security Fund (NSSF) contributions that came into force in 2023, RBA notes this ratio is still low.

“Kenya’s ratio is still lower than that of most middle-income economies, indicating a need for policy reforms aimed at increasing pension coverage and encouraging savings,” says RBA in the industry brief published April 7.

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A higher pension assets to GDP ratio shows that an economy pays retirement benefits with ease. The Netherlands, Australia, Switzerland, the United Kingdom and the United States are some of the economies with high pension assets to GDP at 100 per cent and above.

While argued to be low, Kenya’s pension assets to GDP is higher than its peers on the continent among them Uganda which stands at nine per cent and Rwanda which is 12.7 per cent. The RBA industry brief shows that pension contributions have steadily been growing from Sh70.26 billion in the year ended December 2022, to Sh118.8 billion in the 12 months ended December 2024.

Statutory contributions to NSSF have grown from Sh14.73 billion in 2020 to Sh15.92 billion in 2022 before a sharp increase to Sh25.39 billion and Sh59.25 billion in 2024 due to the enhanced contributions as per the NSSF Act, 2013.

President William Ruto’s goal has been to improve pension contribution to GDP to 25 per cent over 10 years, which informed the enactment of the NSSF Act 2013, in 2023, that had stalled for a decade due to court cases.

This increased contributions from the maximum Sh200 per employee, which is matched by their employer, to the current Sh4,320.

As such, assets under management by NSSF have also shot. “Contributions to NSSF have been on a steady growth over the last three years. The increase in contributions is attributed to the continued implementation of the NSSF Act of 2013,” the industry brief says.

“The total net assets held by NSSF as of December 31, 2024, were Sh476.8 billion, translating to a growth of Sh74.8 billion over the last half year from Sh402.0 billion as of 30 June 2024.” RBA in an earlier document published in February 2025, sees an opportunity in improving coverage by targeting the hard-to-reach informal sector economy, which it says are the majority.