Kenya: NSSF Defends Pension System After Court Refuses Stay Bid

NAIROBI, Kenya, June 5 - The National Social Security Fund (NSSF) has moved to reassure employers that current pension contribution rates remain in force, dismissing calls to revert to the previous Sh200 employee and Sh200 employer deductions despite ongoing court disputes over the NSSF Act, 2013.

In a public statement, the Fund said the Act remains operational and binding, and urged full compliance with the existing contribution schedule, warning that non-compliance risks denying workers accrued retirement benefits and attracting penalties.

"This is to clarify to our members and stakeholders that the NSSF Act is still in force on account of the Judgement of the Court of Appeal rendered on 3rd February 2023."

"The issues pending determination by the Court do not in any way affect contribution rate by employers and employees which remains that of the year four (4) cycle in accordance with the Third Schedule of the NSSF Act."

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The clarification comes amid heightened legal uncertainty following a recent Court of Appeal decision that dismissed an urgent application by the NSSF Board of Trustees seeking to suspend the implementation of a landmark Employment and Labor Relations Court (ELRC) judgment that invalidated key provisions of the NSSF Act, 2013.

A three-judge bench comprising Justices W. Karanja, M'Inoti and Nyamweya ruled that while the intended appeal raises arguable issues, the Fund failed to demonstrate that the case would be rendered nugatory if a stay was not granted, effectively allowing the ELRC decision to remain in force as the substantive appeal proceeds.

The dispute originates from a September 2022 ELRC judgment that struck down key provisions of the NSSF Act, 2013, on grounds including lack of Senate involvement in its enactment, concerns over competition in the pensions sector, and alleged overreach into the regulation of retirement benefits.

The NSSF Act, 2013 had introduced sweeping reforms to Kenya's social security system, replacing the old provident fund model under Cap. 258 with a structured pension scheme.

It also introduced mandatory income-based contributions of up to about 12 per cent of gross earnings shared between employers and employees, expanded coverage to both formal and informal sector workers, and established a tiered system allowing part of contributions to be channeled into private pension schemes.

In opposing the stay application, respondents argued that no legal vacuum exists, maintaining that the previous framework under Cap. 258 continues to apply and that contributions have remained operational under earlier judicial directions.

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The Court of Appeal, however, found that NSSF had not met the threshold for interim relief, noting it had failed to demonstrate imminent irreparable harm or systemic disruption to the pension system if the stay was not granted.

NSSF said its asset base has continued to strengthen despite the legal uncertainty, growing to about Sh715 billion as of March 30, 2026, supported by higher contributions and strong investment returns. The Fund also pointed to returns of 11 per cent in the 2023/24 financial year and 17 per cent in 2024/25, underscoring what it describes as improved long-term sustainability for members.

The Fund reiterated that employers who fail to comply with the current contribution structure risk penalties and could deny employees retirement benefits that have already accrued under the prevailing legal framework.

NSSF further maintained that it will continue implementing court decisions while safeguarding members' savings, even as the dispute over the pension reforms remains firmly before the courts.