Kenyans to contribute 3 per cent of salary to housing fund

Monday, April 24th, 2023 06:20 | By
Kenyans to contribute 3 per cent of salary to housing fund
President William Ruto. PHOTO/PCS

Kenyan workers will contribute three per cent of their pay in order to support the government’s low cost housing programme, President William Ruto said yesterday.

Ruto said the government aims to strengthen the Housing Fund to help more Kenyans purchase affordable housing units.

He revealed that civil servants will also benefit from the programme. “Kenyans will now be contributing three per cent of their income and kick start their journey of owning a house,” said the President.

The Head of State also said that employers will be compelled to contribute three percent of the Housing Fund.  “Every employee who contributes three percent, the law will compel their employer to also contribute three percent to the Housing kitty,” he added.

However, Ruto did not tell whether legislation would be introduced to compel workers and their employers to pay for the Housing Fund.

He said that as the government rolls out the affordable housing programme, there must be a solid plan aimed at addressing the financing of low income -earners to consume the units.

The President spoke when he officially opened the Friends Church (Quakers) Donholm, Nairobi County.  “As a government, we will be at the forefront in implementing this. For all employees of the government, approximately 700,000 - we will be saving 3 per cent for them after they have made their own 3 per cent contribution,” Ruto announced.

Explaining how the Housing Fund will operate, the President added that only civil servants will make the contributions “So that we (Kenya Kwanza administration) can create a fund that will assist people of Kenya to acquire homes.”

He noted that the Kenya Kwanza administration is keen on raising mortgages in the country from the current 40,000 to 2,000,000 which is in line with the country’s economic standards.

In October last year, the President said affordable housing cannot be achieved by the government alone, noting that his administration will ensure private developers get a market for the constructed units when they partner with the State.

Present were Prime Cabinet Secretary Musalia Mudavadi, his spouse Tessie, Cabinet Secretary for Public Service, Affirmative Action and Gender Aisha Jumwa, Nairobi Governor Johnson Sakaja, and several MPs.

President Ruto said the government’s plan of increasing members’ contributions to the National Social Security Fund (NSSF) has helped the country increase its savings.

Foreign debt

He said the move would help the country to manage its foreign debt by borrowing locally. “In just two months, we have doubled the amount of money that we are saving as a country,” he said.

However, the implementation of the new NSSF Fund Act has moved to the Supreme Court with the County Pensioners Association protesting that it will turn the Fund into a monopoly and kill the pensions industry.

In the appeal, the pensioners urge that employers are likely to transfer employees to NSSF from other schemes in a bid to cut costs.

They faulted the Court of Appeal for reviving the 2013 Act after it was quashed by the Employment and Labour Court last year, saying the judges failed to appreciate the effects of the Act. “The Court of Appeal misapplied Article 41 of the Constitution by failing to appreciate that the practical effect of the impugned Act would be to encourage employers, as rational homo economicus, to cut costs by transferring employees from superior pension schemes to the inferior pension scheme established by the questioned Act,” the association said in the application. The Court of Appeal overturned the decision quashing the 2013 Act saying the matter was handled by the wrong court.

A three-judge Bench ruled that the Employment Court wrongly assumed jurisdiction in a matter that should have been handled by the High Court as the ELRC can only hear matters where constitutional issues are raised in a context of an employer-employee dispute.

Their decision paved the way for the NSSF to demand enhanced contributions in compliance with the Act.

Employers remit Sh2,160 for all earners with a gross income of Sh18,000 and above, half of which is a matchup by the employer for the employee contribution.

The deductions are effected on gross pay but the impact is expected to be minimal until the third year of implementing the new rates when the size of contributions is set to go higher.

Workers earning above Sh18, 000 are divided into two levels of contributions- tier I and tier II with the former being with respect to pensionable earnings up to the lower earnings limit of Sh6,000.

Yesterday, the President Ruto said the government is also working with the county government of Nairobi to clean and make the city green. “We are not only going to clean the city of Nairobi, but we are also going to generate electricity out of the refuse of the city,” he said.

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