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    • NSSF Tier II Contributions

    Understanding how Tier II enhances your retirement savings

    🏦 Understanding NSSF Tier II Contributions

    As part of Kenya's pension reform under the National Social Security Fund (NSSF) Act No. 45 of 2013, employers are required to contribute to two tiers of retirement savings for their employees: Tier I and Tier II. While Tier I contributions go directly to NSSF, Tier II contributions can be redirected to Retirement Benefits Authority (RBA) registered and approved pension scheme by the like Maseno University Retirement Benefits Scheme (MURBS).

    🔍 What Is Tier II?

    Tier II refers to the portion of statutory pension contributions that exceed the lower earnings limit and are meant to enhance retirement savings. Employers who opt out of contributing Tier II to NSSF must redirect those funds to a RBA-approved occupational pension scheme.

    Contribution Breakdown

    • Tier I: 6% of the employee's earnings up to the Lower Earnings Limit (LEL) — remitted to NSSF.
    • Tier II: 6% of earnings between the LEL and the Upper Earnings Limit (UEL) — currently remitted to a MURBS.
    Year Upper Earnings Limit Protected rights - Contributions to contracted out Scheme
    Employee - 6% of salary or UEL - Tier I Employee - 6% of salary or UEL - Tier I
    1 50% of National Average Earnings 720 720
    2 1 x National Average Earnings 1740 1740
    3 2 x National Average Earnings 3840 3840
    4 3 x National Average Earnings 5940 5940
    5 & Onwards 4 x National Average Earnings 7740 7740

    🎯 Benefits

    • Enhanced Retirement Savings: Tier II contributions grow your pension pot.
    • Portability: Your savings stay with you even if you change employers.
    • Tax Efficiency: Contributions are tax-deductible, reducing your taxable income.
    • Financial Security: Access to a well-managed fund with long-term growth potential.

    🛠️ How It Works

    The NSSF Tier II contributions is deducted from your normal statutory contributions (existing 10% and 20% contributions).

    Illustration

    Statutory Deductions (On your Payslip)
    Basic Salary = Kshs. 100,000

    • Employer = Kshs. 10,000   NSSF Tier II (Employee) = Kshs. 720
    • Employer = Kshs. 20,000   NSSF Tier II (Employer) = Kshs. 720
    Normal contributions Statement NSSF Tier II Statement
    Employer AVC Employer PRMS Employer Employer
    9,280.00 0.00 19,280 0.00 720.00 720.00

    NSSF Tier II Benefits Access

    Benefits from the Fund are only payable in the following four occurrences:

    • Retirement (Early and Normal)
    • Permanent Emigration
    • Ill-Health
    • Death (payable to beneficiaries)