New NSSF Act in Kenya: Tier I, Tier II, and How It Changes Your Payslip

For years, NSSF was the easiest line on your payslip to ignore. KES 200 per month, flat rate, the same whether you earned KES 15,000 or KES 150,000. Symbolic at best. Then, somewhere between 2024 and today, that KES 200 became KES 800, or KES 1,200, or KES 2,160 — depending on your salary — and a lot of Kenyan employees noticed the difference without quite knowing what happened.

What happened is the NSSF Act 2013. It was passed over a decade ago, challenged in court almost immediately, tied up in legal proceedings for years, and finally upheld by the Court of Appeal in 2023. Full mandatory implementation rolled out from 2024. The new law replaced the old flat-rate system with a two-tier contribution structure tied to your actual salary — and the numbers are a significant step up from what most people were used to paying.

This article explains how Tier I and Tier II work, shows exactly what you should be paying at different salary levels, and covers the one opt-out that many employees do not know exists.

The Old NSSF: Why KES 200 Was Almost Pointless

Under the old National Social Security Fund Act, both the employer and employee each contributed a fixed KES 200 per month — KES 400 in total — regardless of what you earned. A junior employee on KES 12,000 paid KES 200. A manager on KES 250,000 also paid KES 200. That ceiling had not been adjusted in decades and had become almost entirely disconnected from the cost of retirement in any realistic sense.

At KES 200 per month from age 25 to 60 (35 years), total employee contributions would amount to KES 84,000 before any interest — enough to cover perhaps a few months of basic living expenses, not a retirement. The 2013 Act was Parliament's attempt to make NSSF contributions actually meaningful as a pension vehicle.

The New Structure: Tier I and Tier II

Under the new Act, contributions are calculated as a percentage of your pensionable pay (in most cases your gross salary, though some employers define it as basic pay only — check your contract). The structure has two layers, each with its own earnings band:

Tier I — The Lower Earnings Limit

Tier I applies to the first KES 7,000 of your pensionable pay per month. This threshold is called the Lower Earnings Limit (LEL). Both you and your employer contribute 6% of pensionable pay up to the LEL:

• Employee Tier I: 6% × KES 7,000 = KES 420/month
• Employer Tier I: 6% × KES 7,000 = KES 420/month

If your pensionable pay is below KES 7,000, Tier I is calculated on your actual salary instead. For example, if you earn KES 5,000 per month: 6% × KES 5,000 = KES 300 employee contribution, with KES 300 from your employer.

Tier II — The Upper Earnings Limit

Tier II applies to the portion of your pensionable pay between the LEL (KES 7,000) and the Upper Earnings Limit (UEL = KES 36,000). Again, 6% from each side:

• Employee Tier II: 6% × (pensionable pay − KES 7,000), capped at 6% × KES 29,000 = KES 1,740/month
• Employer Tier II: same calculation and same cap

If your salary exceeds KES 36,000, you hit the maximum for both tiers. Your total employee NSSF contribution is capped at KES 420 + KES 1,740 = KES 2,160 per month. Your employer contributes an identical KES 2,160 on top of that.

What You Actually Pay: Worked Examples

Here is how the calculation works out at three different salary levels:

KES 20,000 gross salary:

• Tier I: 6% × KES 7,000 = KES 420
• Tier II: 6% × (KES 20,000 − KES 7,000) = 6% × KES 13,000 = KES 780
• Total employee contribution: KES 1,200/month

KES 30,000 gross salary:

• Tier I: KES 420
• Tier II: 6% × (KES 30,000 − KES 7,000) = 6% × KES 23,000 = KES 1,380
• Total employee contribution: KES 1,800/month

KES 80,000 gross salary (or any salary above KES 36,000):

• Tier I: KES 420
• Tier II: 6% × KES 29,000 = KES 1,740 (capped at UEL)
• Total employee contribution: KES 2,160/month

Old vs New: The Actual Size of the Increase

The table below shows what employees at different salary levels paid under the old flat-rate structure versus what they pay now. The jump is not trivial.

Monthly Gross Salary (KES)	Old NSSF (Employee)	New NSSF (Employee)	Increase
10,000	200	620	+420 (3× more)
20,000	200	1,200	+1,000 (6× more)
30,000	200	1,800	+1,600 (9× more)
36,000+	200	2,160	+1,960 (10.8× more)
80,000	200	2,160	+1,960 (capped)
150,000	200	2,160	+1,960 (capped)

For someone on KES 10,000, the contribution goes from KES 200 to KES 620 — a KES 420 monthly reduction in take-home pay. For someone on KES 30,000, the hit is KES 1,600 per month less in their pocket. At KES 36,000 and above, the maximum increase is KES 1,960 per month — nearly KES 2,000 of extra deductions that were not there before.

This is why so many people opened their payslip, saw a number significantly higher than KES 200 under "NSSF", and assumed something had gone wrong. Nothing went wrong. This is the new normal.

Where Does the Money Actually Go?

Understanding where the two tiers land is worth knowing, especially if you have ever thought about what you might eventually receive from NSSF:

Tier I contributions go directly to NSSF and are managed by the government under a defined benefit arrangement. You cannot access this money until you retire (age 60), take early retirement (age 50 or above), emigrate permanently, or in the event of death. Think of it as the bedrock — locked away, not touchable.

Tier II contributions can also go to NSSF, but there is an option to redirect them to an approved private occupational pension scheme run by your employer. This matters for two reasons: private fund managers have historically produced better returns than NSSF, and Tier II money has slightly more flexible access conditions — for instance, when changing employers (if the scheme rules allow it) or at age 50 with a reduced benefit.

The Opt-Out That Most Employees Do Not Know About

This is probably the most useful thing in this entire article for employees who already have a workplace pension scheme.

If your employer runs an approved occupational pension scheme — meaning a registered retirement benefits scheme with the Retirement Benefits Authority (RBA) — you may be able to opt out of Tier II NSSF contributions and redirect that money into your occupational scheme instead. You keep the same contribution rate (6% of pensionable pay between KES 7,000 and KES 36,000), but the money goes into your private scheme rather than NSSF.

The conditions: the opt-out must be processed through your employer, not by you independently. Your employer's pension administrator needs to confirm that the scheme is RBA-approved and that it meets the NSSF Act's requirements for an exempted scheme. The Tier I contribution (6% up to KES 7,000) still goes to NSSF regardless — there is no opt-out for that portion.

If you work for a bank, a large corporate, or an organisation that already runs a staff pension fund, ask your HR department whether your Tier II contributions have been redirected. Many employees at these employers are covered by the opt-out without even realising it. If you are not, and your employer runs a qualifying scheme, it is worth asking.

Tax Treatment of NSSF Contributions

One thing the new higher contributions do have going for them: NSSF contributions are tax-deductible. The employee share of your NSSF contribution (up to the legal limits) reduces the income subject to PAYE — but only within the overall pension deduction ceiling of KES 20,000 per month across all pension contributions combined.

In practice, for most employees whose only pension contribution is NSSF, the maximum deduction is KES 2,160 per month. That saves you between KES 216 and KES 648 in PAYE depending on which tax band you are in. Not enormous, but it partially offsets the increase from the old rate.

If you contribute to both NSSF and a separate occupational or personal pension, the combined limit is KES 20,000/month (or KES 240,000/year). Contributions above that ceiling are not deductible.

When Can You Access Your NSSF Money?

The access rules differ between the two tiers, but neither is designed for short-term withdrawal:

Tier I:

• Retirement at age 60 (normal retirement age)
• Early retirement at age 50 (with a reduced benefit)
• Permanent emigration from Kenya
• Death (paid out to beneficiaries or estate)
• Total incapacitation

Tier II (if with NSSF):

• Same conditions as Tier I when held with NSSF
• If redirected to an occupational scheme, the scheme's own rules apply — some schemes allow partial access at 50, or a transfer of benefits when leaving an employer

You cannot cash out NSSF because you are changing jobs, need money, or are simply unhappy with the fund's performance. The whole point is that it is illiquid. For employees who find this frustrating, the best lever is to ensure Tier II is going into a private occupational scheme with better governance and returns.

Legal History: Why It Took So Long

The NSSF Act 2013 was signed into law but almost immediately challenged. The Federation of Kenya Employers and others argued the new rates were unconstitutional — partly on procedural grounds around the legislative process. Lower courts issued injunctions blocking implementation at various points. Employers were left in limbo: implement the new rates and risk legal exposure, or stick with the old rates and potentially owe back payments later.

The Court of Appeal ruling in 2023 largely upheld the 2013 Act and cleared the way for implementation. From 2024 onwards, the expectation is that all employers comply with the Tier I and Tier II structure. That said, some employers were slow to update their payroll systems, and you may have colleagues at different companies who started seeing the higher deductions at different points during 2024.

If your employer is still deducting at the old KES 200 rate, they are technically non-compliant — though enforcement levels have varied. The risk is theirs, not yours: employees are not personally liable for an employer's failure to remit the correct amount to NSSF.

Key Numbers to Remember

Item	Value
Lower Earnings Limit (LEL)	KES 7,000/month
Upper Earnings Limit (UEL)	KES 36,000/month
Tier I rate (employee + employer each)	6% of salary up to LEL
Tier II rate (employee + employer each)	6% of salary between LEL and UEL
Maximum employee Tier I	KES 420/month
Maximum employee Tier II	KES 1,740/month
Maximum total employee NSSF	KES 2,160/month
Maximum employer NSSF match	KES 2,160/month
Monthly total to NSSF (both sides, max)	KES 4,320/month
NSSF pension deduction limit (for PAYE)	KES 20,000/month combined

The shift from a KES 200 flat deduction to a percentage-based system is, on balance, a more rational way to build a national pension fund. Whether NSSF will actually manage those contributions well enough to deliver meaningful retirement income is a separate — and fair — question. But the mechanics of the new structure are at least designed to accumulate something worth having. If you have a private occupational scheme available through your employer, using it for Tier II contributions is the most direct way to make sure your retirement savings land somewhere with a track record you can actually check.