Uganda has a bigger pension scheme than Kenya, but a smaller economy
Regime change is always inevitable for any democracy. Rarely, do things remain static. The likelihood of policy shifts and new appointments has been looming over the head of Kenyans this month. The new president, in a bid to encourage a saving culture among netizens, had suggested an increase in the monthly NSSF Contributions. In a social protection conference held in 2018, the then DP was quoted saying, “We want to scale up investment in Social Protection to realize the delivery of Kenya’s Vision 2030 and the achievement of the SDGs.”
True to his words, he sparked an uproar among Kenyans with the proposed increase in NSSF monthly contributions. It has been a reflective period for Kenyans as the president urged them to benchmark from neighboring Uganda.’’Uganda has a bigger pension scheme than ours and a smaller economy. So we have to change,” said the president.
NSSF Uganda had 2.1 million registered members, while NSSF Kenya had 2.6 million registered members as of the 30th of June. Ugandans contribute a mandatory 5% of their income to NSSF which is topped up by an additional 10% from the employer. Kenyans on the other hand remit 6% of their income to NSSF and their employers top up an equal amount. A close comparison of NSSF Uganda and NSSF Kenya shows a huge difference in the total number of assets held and their networths. For instance, NSSF Uganda’s member contributions grew at a compound annual growth rate of 10.13% from 2016 to reach Kshs 40 Billion in 2020. NSSF Kenya’s member contributions grew at a compound annual growth rate of 2.7% over the same period to Kshs 14.7 Billion. Net assets of NSSF Uganda grew by 17% year on year to Kshs 420 Billion in the financial year 2020, while NSSF Kenya’s net assets grew by 6.2% to 249.7 Billion in the same interval.
From the statistics, it is not rocket science to tell that Uganda has a more robust pension scheme than Kenya. A society is only as strong as its most vulnerable people. Individuals need to have a dependable pension scheme that can offer them a quality & valuable life post-retirement. The move to increase the current minimum of Ksh 200, by 1000% to Ksh 2068, had the country split right in the middle. Yes, a saving culture is a high-minded lifestyle that is welcomed. However, are citizens in a financial position to scale up their contributions to NSSF? The inflation rate for August in Kenya stood at 8.5%. This, coupled with the increase in fuel prices which in turn leads to an increase in the price of other basic commodities, means Kenyans have to dig deeper into their shallow pockets to sustain themselves. Kenya Revenue Authority on the other hand has decided to kick Kenyans when they’re already down. It is set to adjust the tax rates to inflation, but most employers are not adjusting their employees’ salaries to inflation! Everything is changing, the only constant thing is salaries.
A section of Kenyans has also argued that an increase in the NSSF Contributions is going to sky-rocket the number of corruption scandals already surrounding the giant pension scheme. It would be better to reform the NSSF and put stringent measures in place to ensure that the money collected is rightly accounted for. Also, NSSF Kenya’s interest declared has only beaten Kenya’s annual inflation rate in only 3 of the last 7 years. NSSF Uganda’s interest declared, however, has beaten Uganda’s annual inflation consistently in the last 7 years. It beats logic saving in a pension scheme whose returns can’t even beat inflation. It means your money is not any different than it would have been if you had it in your normal savings account.
The decision by the High Court to rescind the NSSF Act of 2013, came as a reprieve to a section of both Kenyan employers and employees. The court ruled that the law supporting the increase was unconstitutional as it was not subjected to public participation.