Reforming Kenya’s Legal Regime on State Pensions for the Juakali Sector
Abstract
Prior to enactment of the NSSF Act 2013 - which is the law that sets up the Kenyan state pension
scheme (the National Social Security Fund “the NSSF”) - the antecedent law was the NSSF Act
1965. The NSSF Act 1965 mainly focused on the formal sector, leaving out the informal jua-kali
sector persons in structured pension arrangements. This was a major problem given that this
group is characterized by low income, with vulnerability to economic volatility and change. This
was the genesis of low uptake of state pensions among persons in the jua-kali sector. However,
the enactment of the NSSF Act 2013 shows the Kenyan Government’s intent to improve pension
coverage among persons in the jua-kali sector. Despite this noble initiative, there exists legal
issues in the legal regime governing the NSSF, which hinder participation by persons in the juakali
sector.
For instance, the NSSF Act 2013 lacks incentives that target the jua-kali sector such as flexibility
in contributions and withdrawals. The NSSF also suffers from excessive government control and
interference in its activities, as a result of its governance structure. This leads to mal-practices
and lack of adherence to the provisions of the Retirement Benefits Act 1997. A case in point is
the NSSF’s lack of observance of statutory administrative fees, resulting in high administrative
expenses and low investment returns to a pensioner. Therefore, the excessive government control
and interference in NSSF affairs, makes it difficult for Retirement Benefits Authority to perform
its regulatory and supervisory duties. Conversely, the government has demonstrated less
enthusiasm for the annuities insurance market as compared to the NSSF, leading to unattractive
annuity product prices to the detriment of pensioners. Notwithstanding challenges in the
annuities market, the government still requires income tax on investment in annuities, also to the
detriment of the pensioners.
This study therefore draws its recommendations from South Africa, India and the Code of
Corporate Governance for State Corporations in Kenya – Mwongozo 2015.
Publisher
University of Nairobi
Rights
Attribution-NonCommercial-NoDerivs 3.0 United StatesUsage Rights
http://creativecommons.org/licenses/by-nc-nd/3.0/us/Collections
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