Why it is critical to run NSSF ethically
That the Court of Appeal has made a ruling allowing higher National Social Security Fund (NSSF) contributions is a far-reaching decision that is going to affect employers and employees in a significant way. This makes it all the more critical to ensure that the process — and the billions of shillings to be collected every month — are managed wisely for the benefit of retirees.
If the government is serious about ensuring Kenyans retire in dignity, then it must put in place systems to ring-fence the fund from corruption and bad investment decisions that have in the past eaten away at both the contributions and the earnings arising therefrom.
Even as this is being done at a higher level, at the individual level, systems ought to be put in place to safeguard contributors first, from falling below the two-thirds threshold of deductions to their incomes. Second, deductions must be structured in such a way that incomes are not eroded to the point where workers have to change lifestyles to fund their retirement.
The problem with mega funds in Kenya has always been that those put in charge of managing them have exhibited disregard for the law, due diligence and, most of all, ethics. As a result, they invest workers’ hard earned money in dubious banks that end up collapsing or in suspect businesses that go down with billions of other people’s money. The end result is that contributors end up living in penury and the dream retirement that they had hoped to enjoy turns into a nightmare. This must not be allowed to happen if the road is cleared for the enhanced contributions.
It is also important for NSSF to give value for money to the contributors. As a rule, most private retirement savings plans offer reasonable returns annually, making them attractive to employers and employees in equal measure. The new NSSF, if it is eventually allowed to collect the billions, must pay reasonable returns, at a minimum of 10 per cent per year and it must make payouts efficient and seamless. It must also create digital platforms through which members can constantly check their savings and how they are growing.
In short, it must run as efficiently as though it were a private entity. Only then will it inspire confidence in contributors. Without this, it will end up being another conduit for big shots in government to siphon money through dubious investments that only benefit them.
