The NSSF 17% Return and its Impact on Competition in the Pension Industry
Category: Pension
By: Stephen Jairo,
The National Social Security Fund has outdone itself for its prospective pensioners by proclaiming an interest of 17 percent for members’ savings during the financial year 2025. By all means, and looking at the industry at large, this is not only unprecedented, but for the government and the National Social Security Fund (NSSF), a huge achievement. Of course, noting that firms in the industry are yet to make their declarations, expected anytime as the month of March unfolds, they will face pressure to declare equally high interest rates. But the real question here is this, when the NSSF declared this 17 percent interest on members deposits, what exactly led to this positive increment? A related question becomes, is it sustainable?
Well, the fund went big in making the announcement in early February 2026, engaging leading print and digital media houses in the process. Among the issues that they credit this big announcement to include the claim of growth in funds value to Ksh. 600 billion in 2025, adoption of digital technology and ecosystem in their operations, an active membership of 3.6 million people, and diversification of their investment portfolio.
This announcement makes it necessary to ascertain the truth of this return and whether this rate of return can be sustained In addition, this big news will no doubt change the competitive landscape for players in the pensions industry, even as we await their declared rates.
The NSSF portfolio is made up of member savings, which is also used to pay for the staff salaries, their emoluments and benefits – what we can refer to as operational costs. The membership, according to the press release, stood at 80,000 active registered employers, with an active membership of 3.6 million people. This is not a small number for any organization, especially for the status of an organization such as NSSF. In terms of contribution collections, bearing in mind that the Haba na Haba programme targeting informal sector workers was also rolled-out, the fund has grown by Ksh. 575 billion in value from Ksh. 402 billion in the previous year – translating to a 43 percent growth in total deposits in a single year.
According to the funds’ corporate scorecard, the fund had targeted to collect Ksh. 78 billion during the year. However, it actually collected Ksh. 83.97 billion, which is way above the annual average earlier stated, a positive outcome. This also helps to explain the increase in the fund value which was expected to be at Ksh. 523 million, but was recorded to be at Ksh. 575 million for the year, buoyed by a 22.23 percent returns on investments, and a Ksh. 105.3 billion investment income returns.
Whereas this is applauded, the membership recruitment drive seems not to have yielded as much fruits as was expected, noting that the target set for new member registration and activation of 650,000 was short by about 38,900 members. These shortcomings however, as has been shown above, did not derail the fund from attaining higher returns and increasing its fund value which ultimately led to a higher interest declared for its members, as per the press release.
The NSSF paints a rosy picture over the one-year period, but being alive to the rates declared over the years, the chart below helps to provide some insights.
The chart shows a sharp decline in declared interest from 7 percent in 2018 to less than half the original rate, 3 percent, in 2019. From 2020 however, this trend is reversed and increases to 10 percent in 2021 before another dip to 6 percent. This erratic performance could be attributed to the pandemic period during which savings dipped due to economic constraints, thus affecting both investment returns as well as declared interest rate.
After the dip in 2022 to 6 percent, the rate increases to, and maintains at 11 percent in the following two years, indicating a steady recovery and can also be attributed to growth in number of members registered, increase in contributions due to the phased operationalization of the NSSF Act 2013, as well as improved returns on investments by the fund. This has eventually led to the 17 percent declaration for 2025. The sustainability of this is also in question. There is need for members and indeed the general public to comb through the baseline issues that have led to this outcome such as number of active members being registered, investment income environment, and governance of the fund in its entirety. But this is a separate issue for another blog.
What does this mean for competition in the pensions industry?
To begin with, the sector is awash with entities that provide pensions services to both public and private entities. These are regulated by the Retirement Benefits Authority and have been authorized to receive Tier II contributions on behalf of NSSF i.e. for institutions that opt out of NSSF for this service. In this view, the performance of the leading firms in this industry against that of NSSF becomes a key point of concern for this analysis. Leading performance in this case is in terms of interest rates that these firms have declared over the past five years from 2020.
The competitive landscape is therefore awash with many firms. The selected firms are GA Life, Jubilee, APA Insurance, and Kenindia, which have declared interest rates of at least 8 percent for the period in focus, as detailed in Chart 2. Notably, GA Life leads the pack having declared a rate of 13.25 percent in 2024, followed by Jubilee, APA, and Kenindia with 12, percent, 11.5 percent, and 10.3 percent, respectively. It is important to note the dip for all industry players in 2023, which could have been occasioned by slow market growth and slow recovery post Covid-19 pandemic. While this applies also to NSSF, it is important to note that over the same period, it has been lagging behind, and is the most volatile. However, there seems to be a steady growth from 2023 and 2024 with a declared interest of 11 percent for both years, coming from a low of 6 percent in 2022.
The declaration by the NSSF of a first-time 17 percent interest rate in for the FY 2025 has no doubt sent shivers to the rest of the sector players. However, it is important to note the difference that the NSSF has with these independent pension service providers. Notably, the NSSF is a mandatory national scheme whose objective is to provide retirement benefits to its members upon their exit from active employment. This is a stark difference with private service providers whose operations are based on market forces, and members or contributors can choose to remit or not their contributions to any provider of their choice, which is also contributed to by individual factors such as proximity, and taste and preference of one over another.
In my view, the NSSF intends to ensure institutions yet to opt out do not take that route and instead, retain their savings with it. In addition, this could also be a move to endear the fund to those opting out of Tier II to consider either remaining in the fold, noting that since the regulations allowing for opting-out were in place, many institutions have taken this option.
Conclusion
The NSSF has no doubt outdone itself in the declaration of a 17 percent interest on member savings, being a first in the country. This has also jolted the private sector players in the pensions industry, who will be seeking to ensure they also give their members acceptable returns. However, this move by the NSSF is unprecedented and as such must be looked at within the parameters which have made it possible for the NSSF, against the operational environment for its competitors to avoid panic and rushed decisions.
There is need to even the playing field to ensure consumers get maximum benefits for their savings, be that from the NSSF or from their privately chosen pension service providers, the choices are available for pensioners to make. In all and based on the issues I have raised in this blog, I am not convinced that this rate will hold in the foreseeable future, and instead, implore upon other market players to maximize returns for their members based on prevailing market conditions, and maximize on their comparative advantages.
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The NSSF 17% Return and its Impact on Competition in the Pension Industry
| Post date: Wed, Apr 8, 2026 |
| Category: Pension |
| By: Stephen Jairo, |
The National Social Security Fund has outdone itself for its prospective pensioners by proclaiming an interest of 17 percent for members’ savings during the financial year 2025. By all means, and looking at the industry at large, this is not only unprecedented, but for the government and the National Social Security Fund (NSSF), a huge achievement. Of course, noting that firms in the industry are yet to make their declarations, expected anytime as the month of March unfolds, they will face pressure to declare equally high interest rates. But the real question here is this, when the NSSF declared this 17 percent interest on members deposits, what exactly led to this positive increment? A related question becomes, is it sustainable?
Well, the fund went big in making the announcement in early February 2026, engaging leading print and digital media houses in the process. Among the issues that they credit this big announcement to include the claim of growth in funds value to Ksh. 600 billion in 2025, adoption of digital technology and ecosystem in their operations, an active membership of 3.6 million people, and diversification of their investment portfolio.
This announcement makes it necessary to ascertain the truth of this return and whether this rate of return can be sustained In addition, this big news will no doubt change the competitive landscape for players in the pensions industry, even as we await their declared rates.
The NSSF portfolio is made up of member savings, which is also used to pay for the staff salaries, their emoluments and benefits – what we can refer to as operational costs. The membership, according to the press release, stood at 80,000 active registered employers, with an active membership of 3.6 million people. This is not a small number for any organization, especially for the status of an organization such as NSSF. In terms of contribution collections, bearing in mind that the Haba na Haba programme targeting informal sector workers was also rolled-out, the fund has grown by Ksh. 575 billion in value from Ksh. 402 billion in the previous year – translating to a 43 percent growth in total deposits in a single year.
According to the funds’ corporate scorecard, the fund had targeted to collect Ksh. 78 billion during the year. However, it actually collected Ksh. 83.97 billion, which is way above the annual average earlier stated, a positive outcome. This also helps to explain the increase in the fund value which was expected to be at Ksh. 523 million, but was recorded to be at Ksh. 575 million for the year, buoyed by a 22.23 percent returns on investments, and a Ksh. 105.3 billion investment income returns.
Whereas this is applauded, the membership recruitment drive seems not to have yielded as much fruits as was expected, noting that the target set for new member registration and activation of 650,000 was short by about 38,900 members. These shortcomings however, as has been shown above, did not derail the fund from attaining higher returns and increasing its fund value which ultimately led to a higher interest declared for its members, as per the press release.
The NSSF paints a rosy picture over the one-year period, but being alive to the rates declared over the years, the chart below helps to provide some insights.
The chart shows a sharp decline in declared interest from 7 percent in 2018 to less than half the original rate, 3 percent, in 2019. From 2020 however, this trend is reversed and increases to 10 percent in 2021 before another dip to 6 percent. This erratic performance could be attributed to the pandemic period during which savings dipped due to economic constraints, thus affecting both investment returns as well as declared interest rate.
After the dip in 2022 to 6 percent, the rate increases to, and maintains at 11 percent in the following two years, indicating a steady recovery and can also be attributed to growth in number of members registered, increase in contributions due to the phased operationalization of the NSSF Act 2013, as well as improved returns on investments by the fund. This has eventually led to the 17 percent declaration for 2025. The sustainability of this is also in question. There is need for members and indeed the general public to comb through the baseline issues that have led to this outcome such as number of active members being registered, investment income environment, and governance of the fund in its entirety. But this is a separate issue for another blog.
What does this mean for competition in the pensions industry?
To begin with, the sector is awash with entities that provide pensions services to both public and private entities. These are regulated by the Retirement Benefits Authority and have been authorized to receive Tier II contributions on behalf of NSSF i.e. for institutions that opt out of NSSF for this service. In this view, the performance of the leading firms in this industry against that of NSSF becomes a key point of concern for this analysis. Leading performance in this case is in terms of interest rates that these firms have declared over the past five years from 2020.
The competitive landscape is therefore awash with many firms. The selected firms are GA Life, Jubilee, APA Insurance, and Kenindia, which have declared interest rates of at least 8 percent for the period in focus, as detailed in Chart 2. Notably, GA Life leads the pack having declared a rate of 13.25 percent in 2024, followed by Jubilee, APA, and Kenindia with 12, percent, 11.5 percent, and 10.3 percent, respectively. It is important to note the dip for all industry players in 2023, which could have been occasioned by slow market growth and slow recovery post Covid-19 pandemic. While this applies also to NSSF, it is important to note that over the same period, it has been lagging behind, and is the most volatile. However, there seems to be a steady growth from 2023 and 2024 with a declared interest of 11 percent for both years, coming from a low of 6 percent in 2022.
The declaration by the NSSF of a first-time 17 percent interest rate in for the FY 2025 has no doubt sent shivers to the rest of the sector players. However, it is important to note the difference that the NSSF has with these independent pension service providers. Notably, the NSSF is a mandatory national scheme whose objective is to provide retirement benefits to its members upon their exit from active employment. This is a stark difference with private service providers whose operations are based on market forces, and members or contributors can choose to remit or not their contributions to any provider of their choice, which is also contributed to by individual factors such as proximity, and taste and preference of one over another.
In my view, the NSSF intends to ensure institutions yet to opt out do not take that route and instead, retain their savings with it. In addition, this could also be a move to endear the fund to those opting out of Tier II to consider either remaining in the fold, noting that since the regulations allowing for opting-out were in place, many institutions have taken this option.
Conclusion
The NSSF has no doubt outdone itself in the declaration of a 17 percent interest on member savings, being a first in the country. This has also jolted the private sector players in the pensions industry, who will be seeking to ensure they also give their members acceptable returns. However, this move by the NSSF is unprecedented and as such must be looked at within the parameters which have made it possible for the NSSF, against the operational environment for its competitors to avoid panic and rushed decisions.
There is need to even the playing field to ensure consumers get maximum benefits for their savings, be that from the NSSF or from their privately chosen pension service providers, the choices are available for pensioners to make. In all and based on the issues I have raised in this blog, I am not convinced that this rate will hold in the foreseeable future, and instead, implore upon other market players to maximize returns for their members based on prevailing market conditions, and maximize on their comparative advantages.
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Introduction The matatu metaphor can be used to analytically frame Kenya’s budget as a system that is subject to binding constraints, evolving expectations, and continuous adjustment to shocks. Like the matatu sector, fiscal policy reflects a balancing act between efficiency and quick action seeking to respond to public service delivery while constrained by competing sector […]
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