The NSSF Tier II came about because of the NSSF Act 2013. One of the biggest wins of this act was the “Opt-Out” provision for Tier II allowing the private sector to “contact out”, which is our main focus today. In this article, I will take you through the act, understanding of NSSF Tier I & Tier II and how to compute and the benefits of contracting out to a regulated Pension Fund Manager such as Britam.
NSSF Contribution Tier I and Tier II Calculator
The NSSF Act No. 45 of 2013
The National Social Security Fund (NSSF) Act No. 45 of 2013 was introduced on 24 December 2013 to replace the NSSF Act Cap 258 of 1965. While it was enacted in 2013, its full implementation was delayed by legal hurdles until 3rd February 2023, almost 10 years later, when the court of appeal upheld its constitutionality and directed its implementation with immediate effect.
This act brought a major shift to the scheme, from a simple provident fund to a sophisticated and comprehensive social security scheme. The scheme moved away from the “flat-rate” system of the 1965 Act to a “graduated” or “percentage-based” system aimed at ensuring Kenyans have more substantial savings at retirement.
The key provisions of of the NSSF Act 2013 include:
- The act introduced a mandatory contribution of 12% of the pensionable earnings (6% from the employee and 6% matched by the employer), moving away from old flat KES 200 contribution per month. This introduced a Two-Tier System categorising these contributions. The Two-Tier system (Tier I and Tier II) is a graduated scale subjected on pensionable income.
Tier I contributions must be remitted to NSSF directly (mandatory). They are contributions on earnings up to the Lower Earnings Limit (LEL) defined every year.
Tier II are contributions on earnings between the LEL and the Upper Earnings Limit (UEL). They are the contributions that the private sector can now contract out to regulated Pension Fund Managers.
To minimise a sudden economic shock, the act is being implemented in phases over five years. As a result, The Lower Earnings Limit (LEL) and Upper Earnings Limit (UEL) increase annually.
For the current year 2026 cycle:
- Lower Earnings Limit (LEL): KES 9,000 (Tier I is 6% of this).
- Upper Earnings Limit (UEL): KES 108,000 (Tier II covers the gap between LEL and UEL).
For private Pension Fund Managers the biggest win was the authorization of private sector contracting out to them. For employers who have a registered private pension scheme or a zonal scheme (approved by the Retirement Benefits Authority (RBA)) can now apply to have their Tier II contributions sent to their private scheme instead of the NSSF.
Need Help Contracting Out NSSF Tier II?
This is where I come in. I can assist your company with the RBA application, the mandatory employee notifications, and moving your Tier II contributions to a private scheme for better returns.
Professional Assistance with NSSF Compliance & RBA Regulations
Moving your NSSF Tier II contributions to a private pension fund manager carries a lot of benefits as shall list them later on.
Newly Introduced Benefits
Allow me to touch on this briefly as it is of importance to you. The NSSF Act 2013 moved beyond simple savings to a complex retirement benefit. The act introduced more robust social protection with special benefits.
- Funeral Grant: Upon death of a member who was actively contributing, an immediate payment is made to the family or dependants to cover funeral expenses. This payment should be processed quickly to provide financial support to the family during the mourning period.
- Invalid Pension (Physical or Mental Disability): The benefit supports members who no longer work due to physical or mental disability. To be eligible for this benefit, a member must be certified by the Fund’s appointed doctor as being permanently incapable of working. There is also a partial incapacity benefit which covers members who are at least 50 years old and suffer from a permanent partial incapacity that prevents them from securing regular employment.
- Survivors’ Benefit: This benefit is paid to dependents of a member who dies before reaching retirement age. This payment is made in the order of priority, starting with the spouse, then children (regardless of age), then parents, and finally siblings if no closer relatives exist. The survivors’ benefit ensures that the accumulated Tier I and Tier II savings are not lost, but serves as a safety net for the deceased family members.
- Emigration Grant: This benefit is for members who are leaving Kenya permanently, a country outside East Africa Community (EAC). The member can claim their full accumulated contributions (both employee and employer portions) plus interest before they leave Kenya.
- Retirement Pension (The Shift to Annuities): The old NSSF act mostly paid out a one-time lump sum. The current NSSF Act of 2013 emphasizes a monthly pension, which is referred to as an annuity. Members will now receive a portion of their savings as a lump-sum at retirement and while the remainder is used to provide a regular monthly income for life, mimicking a professional private pension scheme such as Britam’s.
I was not as brief as I had promised, sorry, but you needed to know the benefits that come with the new NSSF Act of 2013.
The Shift: NSSF Act (Cap 258) vs. NSSF Act 2013
| Feature | Old Act (Cap 258 of 1965) | New Act (No. 45 of 2013) |
| Contribution Rate | Flat rate (Max KES 400 total). | 12% of earnings (6% employee/employer). |
| Nature of Fund | Provident Fund: Paid as a one-off lump sum upon retirement. | Pension Fund: Offers monthly payouts (annuities) for life, plus a lump sum. |
| Tier Structure | Single tier. | Two-tier (Tier I and Tier II). |
| Contracting Out | Not possible. All funds went to NSSF. | Employers can “opt-out” Tier II to private schemes. |
| Informal Sector | Limited engagement. | Formalized voluntary contributions for the self-employed. |
NSSF Tier I and Tier II Computation
A table showing NSSF Act 2013 implementation in phases since 2023, with Lower and Upper Earning Limits for each phase/year.
| Phase | Year | Lower Earning Limit (LEL) | Upper Earning Limit (UEL) |
| 1 | 2023 | 6,000 | 18,000 |
| 2 | 2024 | 7,000 | 36,000 |
| 3 | 2025 | 8,000 | 72,000 |
| *4 | *2026 | *9,000 | *108,000 |
| **5 (Final Phase) | 2027 | 20,000 | 144,000 |
Since we are in the year 2026, let’s do computation based on this year’s Lower Earning Limit and Upper Earning Limit.
For 2026, progressive implementation schedule for the NSSF Act 2013, the rates are calculated using a Lower Earnings Limit (LEL) of KES 9,000 and an Upper Earnings Limit (UEL) of KES 108,000.
The total contribution is 12% of pensionable earnings, split equally between the employer and the employee, 6% each.
Tier I (Mandatory to NSSF)
Calculated as 12% of any amount up to the LEL (KES 9,000).
- Calculation: 12% of 9,000 = KES 1,080, split between the employee KES 540 and Employer pays KES 540.
Tier II (To NSSF or Private Scheme)
Calculated as 12% of the earnings between the LEL and the UEL (the “pensionable balance”).
- Maximum Tier II Calculation: 12% of (108,000 – 9,000) = 12% of 99,000 = KES 11,880, split between the Employee pays KES 5,940 and Employer pays KES 5,940.
NSSF Tier I & Tier II Calculator
NSSF Contribution Tier I and Tier II Calculator
Summary of Monthly Maxima (2026)
| Contribution Type | Employee (6%) | Employer (6%) | Total Contribution (6%) |
| Tier I (Max) | KES 540 | KES 540 | KES 1,080 |
| Tier II (Max) | KES 5,940 | KES 5,940 | KES 11,880 |
| Combined Max | KES 6,480 | KES 6,480 | KES 12,960 |
Computation Examples by Salary Level
Example I: Monthly Salary of KES 50,000
- Tier I Employee Contribution: 6% of the first 9,000 = KES 540
- Tier I Employer Contribution: 6% of the first 9,000 = KES 540
- Total Tier I Contribution: KES (540+540) = KES 1,080 (Mandatory, Remit to NSSF)
- Tier II Employee Contribution/Deduction: 6% of the remaining balance (50,000 – 9,000 = 41,000) = KES 2,460
- Tier II Employer Contribution: 6% of the remaining balance (50,000 – 9,000 = 41,000) = KES 2,460
- Total Tier II Contribution: KES (360+360) = KES 4,920 (You can remit to Either Private Pension Manager or NSSF)
Total Employee Contribution/Deduction (Tier I + Tier II): KES 3,000
Total Employer Contribution (Employer Matches Employee’s Contribution): KES 3,000
Example II: Monthly Salary of KES 150,000 (Above the UEL)
- Tier I Employee Contribution: 6% of the first 9,000 = KES 540
- Tier I Employer Contribution: 6% of the first 9,000 = KES 540
- Total Tier I Contribution: KES (540+540) = KES 1,080 (Mandatory, Remit to NSSF)
- Tier II Employee Contribution/Deduction: 6% of the remaining balance (108,000 – 9,000 = 99,000) = KES 5,940
- Tier II Employer Contribution: 6% of the remaining balance (108,000 – 9,000 = 99,000) = KES 5,940
- Total Tier II Contribution: KES (360+360) = KES 11,880 (You can remit to Either Private Pension Manager or NSSF)
Total Employee Contribution/Deduction (Tier I + Tier II): KES 6,480
Total Employer Contribution (Employer Matches Employee’s Contribution): KES 6,480
Example III: Monthly Salary of KES 7,000 (Below LEL, Such As Part Time Employees)
- Tier I Employee Contribution: 6% of 7,000 = KES 420
- Tier I Employer Contribution: 6% of 7,000 = KES 420
- Total Tier I Contribution: KES (420+420) = KES 840 (Mandatory, All Tier I Goes to NSSF)
Total Employee Contribution/Deduction (Tier I): KES 420
Total Employer Contribution(Employer Matches Employee’s Contribution): KES 420
The Process Of Contracting Out to Private Pension Fund Manager
- Reach out to me (my phone number/WhatsApp link) is provided above or a pension fund manager of your choice for assistance with applying to the Retirement Benefits Authority (RBA) to contract out your NSSF Tier II contributions.
- Following approval, the RBA will issue a Contracting Out Certificate to you ( the employer), which must then be submitted to NSSF.
- Once approved to contract out, you (the employer) start remitting Tier II contributions to private retirement fund scheme.
- The last step is to apply to have the Tier II contributions already remitted to NSSF to be transferred to the Private Retirement Fund Scheme.
Benefits of Contracting Out to Regulated Pension Manager
- Potential For Higher Returns: As opposed to the government, private pension schemes do better in terms of earning returns because they are efficiently run. For example, even before announcing the previous year net rate, Britam offers a guaranteed rate of return of 5% as well as competitive bonuses. For the year 2025-2026, Britam announced a 13% net return rate on pension.
- Professional Management Of Funds: In most cases private pension schemes are managed by the most skillful, qualified, and experienced team that handles the day-to-day administration and investment of funds.
- Highest Service Standards: In private schemes you experience dedicated support during setup, contracting-out process, and the after service. For example in Britam, you will get a dedicated relationship manager and a selfservice portal access for employees.
- Prompt Benefit Settlement: In private schemes, you will get efficient claims processing of pension benefits and ease of transfer to post-retirement plans and products. Private schemes are generally perceived to have faster and more streamlined administrative processes.
- Member Education: Due to their high efficiency and up to date technology, private schemes offer free continous member education and industry updates through regular workshops, webinars, and similar forums.
- End-to-end Retirement Planning Solutions: With private pension managers, you will get tailor-made solutions that cater for both pre and post-retirement planning ensuring a secure future with structured pension plans. Retirees receive a steady monthly income, providing financial stability and peace of mind throughout their retirement years.
- Compliance and Control: Most private pension schemes offer transparency in all their dealings and compliance with laid-down investment regulations. You will track your savings in real time and have a say in the governance of the fund through a Board of Trustees, providing a level of oversight that is not possible with a national fund
I hope by now you have all the information you need about contracting out to a regulated Pension Scheme, such as Britam, at your finger tips.
For clarification or further engagement, please post your question(s) in the comments section or reach out to me via the WhatsApp link provided or call me through the provided line.
Thank you, my dear reader.
