Casual workers at a construction site /FILE
Kenya’s retirement savings industry is showing signs of strain as slow growth in formal jobs and uptake of gig economy is now slowly haunting the pension industry.
This is after the number of new pension contributors in Kenya fell sharply to 245,581 in 2024, underscoring the impact of sluggish formal job creation and rising reliance on casual labour by employers, new data from the Retirement Benefits Authority (RBA) shows.
Latest data from the regulator indicates that total active pension scheme members stood at 3.75 million, with new entrants declining even as overall fund values and contributions grew.
By comparison, most of the membership growth came from statutory contributions under the National Social Security Fund (NSSF), which accounted for the bulk of the 200,183 new members registered in 2024.
Analysis of the data shows that the slowdown reflects structural weaknesses in the labour market.
The shift towards casual and contract work has been a growing trend in Kenya’s labour market.
With many companies outsourcing functions, cutting back on permanent hiring, or depending heavily on gig and informal workers, large sections of the workforce remain outside the pension system.
The decline comes despite reforms under the NSSF Act and efforts by RBA to expand coverage.
“Total contributions rose significantly in 2024, largely driven by increased employer and member contributions following the implementation of enhanced NSSF rates.” the survey says in part, further adding that:
“While normal contributions from both parties showed strong growth, additional voluntary contributions and medical fund contributions declined, suggesting a shift in focus toward mandatory contributions.”
Kenya’s pension coverage ratio — measured against the working-age population — stood at 26.57 per cent in 2024, leaving nearly three-quarters of workers, mainly in the informal economy, outside any retirement savings plan.
This simply means that nearly three out of four working-age Kenyans between the ages of 18 and 60 years are not saving for retirement through a regulated scheme.
At the same time, total pension contributions jumped by 29 per cent to Sh263.5 billion in 2024, driven by higher employer and employee remittances following the phased rollout of new NSSF rates.
This helped push the industry’s total fund value to a record Sh2.23 trillion, with government securities remaining the dominant investment class.
Similarly, total fund value hit an all-time high of Sh2.23 trillion, up from Sh1.84 trillion in 2023, driven by a 74 per cent surge in investment income and steady growth in assets
Industry experts warn that unless job creation in the formal sector improves, growth in pension coverage will remain limited.
“The strength of the pension sector is being supported by larger schemes and higher contributions, but the base of contributors is not widening fast enough,” the RBA noted in the report.
Meanwhile, the pension industry is facing a growing scrutiny over unremitted contributions, which rose to Sh69.4 billion in 2024, reflecting delayed payments by employers, particularly in the public sector.
The authority is now pushing for changes to the law to rein in the chief executive officers (CEOs) and accounting officers of State agencies who collected but not remitted statutory deductions.
Despite targeted awareness campaigns and policy interventions, including the full implementation of the NSSF Act, retirement coverage has only inched forward.
The RBA itself acknowledges the challenge, noting in its report that while membership and coverage expanded, “a significant proportion of workers in the informal sector remain outside the pension system, highlighting the need for innovative and flexible pension solutions.”
