Top 5 Pension Plans in Kenya (2025 Guide): Securing Your Future
Planning for retirement is no longer a luxury—it’s a necessity, particularly in Kenya. With rising living costs, evolving family support structures, and increasing life expectancy, securing your financial future requires proactive measures. While the National Social Security Fund (NSSF) provides a baseline, private pension plans offer enhanced returns, tax advantages, and greater flexibility. In this comprehensive guide, we’ll explore top pension providers in Kenya, their features, and how to select the best plan to safeguard your retirement.
Key Takeaways
- Private pension plans offer better returns and tax benefits than NSSF alone
- Early saving benefits from compound interest, potentially growing a Ksh 10,000 monthly contribution to Ksh 38 million over 35 years
- Top providers include Old Mutual, Britam, APA Life, Madison, and GA Insurance
- Contributions up to Ksh 20,000 monthly are tax-deductible
- Compare returns, fees, flexibility, and governance when choosing a pension plan
- Step by Step Insurance partners with leading providers to offer customized retirement solutions
Table of Contents
- Why Retirement Planning Matters in Kenya
- Key Factors to Compare Pension Plans
- Top Pension Plans in Kenya (2025): Provider Highlights
- Comparison of the Best Pension Plans
- How Step by Step Partners With Pension Providers
- How to Start a Pension Plan in Kenya
- Tax Benefits of Pension Plans
- Common Mistakes to Avoid
- FAQs About Pension Plans in Kenya
Why Retirement Planning Matters in Kenya
Kenya faces demographic and economic shifts that underscore the urgency of retirement planning. Here are critical points to consider:
- Aging Population: Kenya’s population is aging, increasing the dependency ratio and straining social security systems.
- Inflation: At a current rate of 6.8%, inflation erodes the purchasing power of savings over time.
- NSSF Limitations: NSSF provides limited payouts. As per a report, the maximum payout can reach Ksh 1,080,000 but this lump sum often falls short of retirees’ long-term needs.
- Rising Healthcare Costs: Healthcare expenses tend to increase with age.
- Economic Uncertainties: Job security and economic stability can’t be guaranteed, making personal savings essential.
Private pension plans, regulated by the Retirement Benefits Authority (RBA), offer numerous advantages:
- Compound Interest Growth: Early savings benefit significantly from compounding. For instance, saving Ksh 10,000 per month with a 10% annual return could grow to approximately Ksh 38 million over 35 years.
- Tax Benefits: Contributions are tax-deductible up to Ksh 20,000 per month (Ksh 240,000 annually).
- Flexibility: Adjust contribution amounts, make lump-sum additions, and potentially access funds for emergencies.
Key Factors to Compare Pension Plans
1. Returns and Investment Options
Providers invest funds in various assets, including stocks, bonds, and real estate.
- Old Mutual: Known for diversified portfolios with historical returns surpassing 10%. They offer segregated and guaranteed options.
- APA Life: Guarantees a minimum 4% return, with bonus yields.
Investment strategies vary, impacting potential returns and risk levels.
2. Fees and Charges
Understand all associated fees. These include:
- Management Fees: Usually a percentage of the fund’s value.
- Administration Fees: Charged for managing accounts and providing statements.
- Withdrawal Penalties: Fees for accessing funds before retirement age.
| Provider | Annual Fees | Withdrawal Penalties |
|---|---|---|
| Old Mutual | 1.25% | None |
| Britam | 1.5% | 5% for early exit (depending on plan) |
| Madison | 1.3% | None |
3. Flexibility
Flexibility is crucial to accommodate life changes:
- Contribution Frequency: Providers typically offer monthly, quarterly, or lump-sum contributions.
- Early Access: Some plans allow partial withdrawals for specific needs. APA Life permits members to use up to 60% of their savings as mortgage collateral.
- Portability: Can you transfer your pension if you change jobs?
4. Regulation and Governance
All legitimate pension providers must be approved and regulated by the RBA. This ensures:
- Fund Security: Adherence to investment guidelines that protect members’ savings.
- Transparency: Regular reporting and disclosure of fees, performance, and governance.
Top Pension Plans in Kenya (2025): Provider Highlights
1. Old Mutual Individual Pension Plan
Old Mutual offers an Individual Pension Plan (IPP) designed for personal savings towards retirement.
Key Features:
- Flexibility: Adjust contributions based on your preferences.
- Tax Benefits: Contributions are tax-exempt up to set limits.
- No Penalties for Withdrawal: Access up to 60% for a mortgage loan.
- Consolidation: Consolidate pension benefits from various employers to maximize savings.
Benefits:
- Build a fund to achieve your dreams.
- Cover medical expenses.
- Invest NSSF Tier II contributions.
- High investment returns.
- Cost-efficient planning.
- Competent customer service.
- Prompt payment of claims.
- Free financial education.
- Access to a wide range of financial solutions.
- Flexible retirement plan options.
Fees: 1.25% annual fee of the funds under management.
Suitable for: Individuals aged 18 and above.
Tax-Deductible Contributions: Up to 30% of pensionable salary or a maximum of Kshs 20,000 per month.
2. Britam Retirement Plan
Britam offers flexible retirement plans designed to ensure a consistent source of income while maintaining your lifestyle.
Types of Plans:
- Pension Plan: One-third of the accumulated benefit is paid as a lump sum, with the remaining two-thirds paid as regular income for life.
- Provident Plan: The entire accumulated amount is paid as a single lump sum upon retirement.
Benefits:
- Exponential savings growth with interest.
- Retirement benefits paid according to the option selected.
3. APA Life Individual Pension Plan
APA Life’s Individual Pension Plan (IPP) is a long-term investment plan that helps build a sizeable retirement fund with competitive interest rates.
Why APA IPP?
- Guaranteed Returns: Member’s contributions and earnings are guaranteed against investment loss at a minimum of 4%.
- Bonus Returns: Offers bonus returns in addition to guaranteed interest.
- Risk-Free: Investments risk borne by APA.
- Flexibility: Flexible contributions and withdrawals.
- Mortgage Collateral: Use up to 60% of the fund as collateral for a mortgage.
- No Hidden Costs: Offers no costs of joining or administering the fund.
- Power of Compounding: APA has averaged 10% net investment returns over the last 10 years.
Example:
| Current Age | Years of scheme membership | Monthly contribution | Accumulated contribution at retirement | APA projected average return | Retirement benefits at guaranteed returns (4%) | Retirement benefits average returns (10%) |
|---|---|---|---|---|---|---|
| 25 | 35 | 1,000.00 | 420,000.00 | 10.00 % | 916,776 | 3,828,276 |
| 25 | 35 | 2,000.00 | 840,000.00 | 10.00 % | 1,833,553 | 7,656,553 |
| 25 | 35 | 4,000.00 | 1,680,000.00 | 10.00 % | 3,667,106 | 15,313,106 |
| 25 | 35 | 5,000.00 | 2,100,000.00 | 10.00 % | 4,583,883 | 19,141,383 |
| 25 | 35 | 6,000.00 | 2,520,000.00 | 10.00 % | 6,417,436 | 22,969,660 |
| 25 | 35 | 8,000.00 | 3,360,000.00 | 10.00 % | 7,334,213 | 30,626,213 |
| 25 | 35 | 10,000.00 | 4,200,000.00 | 10.00 % | 9,167,767 | 38,282,767 |
| 25 | 35 | 20,000.00 | 8,400,000.00 | 10.00 % | 18,335,534 | 76,565,534 |
Reporting: Members receive annual benefit statements.
Governance: Managed by a professional independent corporate board of trustees.
4. Madison Personal Pension Plan
Madison Insurance offers a Personal Pension Plan designed to provide retirement, savings, and investment benefits to individuals.
Key Features:
- Specially designed savings plan for retirement.
- Maximizes returns.
- Ideal for individuals and occupational schemes.
Declared Interest Rates:
- 2021: 11%
- 2020: 8%
- 2019: 10%
- 2018: 10%
- 2017: 10%
Premium Payment Modes:
- M-Pesa
- Cheque
- Bank Transfers
- Check-offs for regular contributions
Benefits:
- Ensures a decent standard of living in retirement.
- Contributions up to Kshs. 20,000.00 are tax deductible.
- Members can assign up to 60% of their benefits as security for mortgages.
- Upon death, accumulated funds are paid to beneficiaries immediately.
- Operates under the RBA act.
- Single lump sum contributions allowed.
- Option to buy annuity at retirement.
- Additional cover on life, critical illness, and last expense.
Enrollment:
- Fill a proposal form.
- Provide copies of ID and PIN.
- Pay initial contribution or provide transfer request letter.
5. GA Insurance Personal Pension Plan
GA Insurance’s Personal Pension Plan is a long-term investment designed to help you build a retirement fund.
Who Forms The Scheme? GA Life Assurance Limited established the scheme.
Who Can Join? Employed individuals, self-employed individuals, and SMEs/groups.
How to Join? By completing an application form.
Contributions: You contribute a fixed amount from your salary, and employers can also contribute.
Tax Benefits:
- Monthly contributions are not subjected to PAYE (up to Kshs. 20,000 per month).
- Employers can treat contributions as a tax-allowable expense.
Income from Contributions: Contributions are invested and earn income from the day they are received.
Guaranteed Returns: 100% capital guarantee, with a minimum guaranteed return of 4%.
Fund Value Statements: Members receive monthly statements showing their fund status.
Leaving Job/Moving Jobs:
- 100% of your contributions plus accrued interest is paid to you (less taxes).
- Employer’s contributions are locked until age 50 and can be left in the scheme, moved to a new employer’s scheme, or moved to an individual retirement plan.
Death Benefits: 100% of your contributions and employer’s contributions plus accrued interest is paid to the nominated beneficiary immediately (less taxes).
Incapacity Benefits: 100% of contributions and accrued interest is paid to you.
Early Retirement: You can retire at age 50 and take 1/3rd of the fund as cash, with the remaining 2/3rd converted into a monthly pension.
Comparison of the Best Pension Plans
| Provider | Minimum Contribution | Returns | Unique Perks |
|---|---|---|---|
| Old Mutual | Ksh 1,000/month | 10% (historical) | Mortgage collateral, no withdrawal penalties, consolidation of funds, access to financial advice |
| Britam | Ksh 2,000/month | 8–12% (historical) | Critical illness coverage (optional), variety of investment plans, flexible payment options |
| APA Life | Ksh 1,000/month | 4% (guaranteed) + bonus | Mortgage collateral, no fees, guaranteed returns, high historical average returns |
| Madison | Ksh 1,500/month | 5–11% (historical) | Early retirement option (at 50), additional insurance riders (life, critical illness), option to buy annuity, RBA-regulated |
| GA Insurance | Ksh 5,000/month | 4% (guaranteed) + growth | 100% capital guarantee, monthly fund statements, employer tax benefits, ability to join as an individual or through employer, flexible investment options |
How Step by Step Partners With Pension Providers
At Step by Step Insurance, we’ve established strategic partnerships with Kenya’s leading pension providers to ensure you receive personalized retirement solutions tailored to your unique financial goals. Our independent advisory approach means we work for you, not the providers, giving you access to unbiased recommendations and preferential terms.
Personalized Assessment
Our certified financial advisors conduct comprehensive evaluations of your financial situation, retirement goals, and risk tolerance. This thorough assessment forms the foundation of our recommendations, ensuring the pension plan we suggest aligns perfectly with your long-term objectives.
Negotiated Benefits
Through our established relationships with Old Mutual, Britam, APA Life, Madison, and GA Insurance, we’ve negotiated exclusive benefits for our clients, including reduced management fees, waived administrative charges, and enhanced returns. These partnerships allow us to secure terms that aren’t available to individual applicants.
Streamlined Application Process
We simplify the enrollment process by handling the paperwork, documentation requirements, and coordination with providers. Our team manages the entire application journey, from initial submission to account setup, saving you time and eliminating bureaucratic hassles.
Ongoing Portfolio Management
Our partnership doesn’t end when your pension plan is established. We provide continuous oversight of your retirement portfolio, conducting regular performance reviews, suggesting adjustments when necessary, and keeping you informed about market trends that might impact your investments.
Multi-Provider Strategy
Unlike agents tied to a single provider, Step by Step can recommend pension plans from multiple companies, often creating diversified retirement strategies that combine the strengths of different providers. This approach maximizes returns while minimizing risk through strategic diversification.
Educational Resources
Our partnerships enable us to offer exclusive access to retirement planning workshops, financial literacy seminars, and specialized educational materials developed in collaboration with Kenya’s top pension providers. These resources empower you to make informed decisions about your financial future.
By leveraging our strong relationships with Kenya’s premier pension providers, Step by Step Insurance creates customized retirement solutions that maximize returns, minimize fees, and align perfectly with your financial goals. Our independent advisory approach ensures you receive unbiased recommendations focused solely on securing your financial future.
Schedule Your Free Retirement ConsultationHow to Start a Pension Plan in Kenya
- Assess Your Retirement Goals: Estimate your future living expenses, desired lifestyle, and potential healthcare costs. Aim to save 10-30% of your current income.
- Compare Providers: Utilize the comparison table above and conduct thorough research on each provider.
- Enroll: Complete the application form. You’ll typically need your ID, PIN, and initial contribution.
- Set Up Payments: Automate contributions via M-Pesa, bank transfers, or salary deductions.
- Review Performance Annually: Stay informed about your fund’s performance and make adjustments as needed.
Tax Benefits of Pension Plans
Pension plans in Kenya offer significant tax advantages:
- Contributions: Tax-deductible up to Ksh 20,000 per month (Ksh 240,000 annually), reducing your taxable income.
- Investment Growth: Investment returns within the fund are tax-free.
- Withdrawals: Taxed as follows:
- Lump-sum withdrawals: Subject to taxation based on prevailing tax laws.
- Annuities (regular monthly payments): May be structured to minimize tax liability.
Common Mistakes to Avoid
- Delaying Enrollment: Starting early is critical. The power of compounding means that the earlier you begin, the more your retirement savings will grow.
- Ignoring Fees: High fees can erode your returns over time. Always factor in management, administration, and transaction fees.
New NSSF Rates Effective from February 2025 Everything You Need to Know
New NSSF Rates Effective from February 2025: Everything You Need to Know
Kenya’s National Social Security Fund (NSSF) is set to introduce revised contribution rates starting February 2025. This update is part of the phased implementation of the NSSF Act, 2013 – aimed at enhancing retirement savings for both employees and employers.
- Understanding the NSSF Act and Its Purpose
- Why Are the NSSF Rates Changing in 2025?
- New NSSF Rates Effective February 2025
- How Will the New NSSF Rates Affect Your Salary?
- How Will the New NSSF Rates Affect Employers?
- Benefits of the New NSSF Rates
- How to Calculate Your NSSF Contribution (With Examples)
- Common Questions About the New NSSF Rates
- Final Thoughts: Preparing for the Changes
- Useful External Resources
- Conclusion
Understanding the NSSF Act and Its Purpose
The NSSF Act, 2013 was introduced to bolster Kenya’s social security framework by increasing pension savings. Before the Act, fixed contributions were inadequate for securing a robust retirement. The Act mandates a gradual increase in contribution rates over a five-year period to ensure fair contributions from both employees and employers.
Why Are the NSSF Rates Changing in 2025?
The revised rates result from extensive legal reviews and court rulings. On 21 February 2024, the Supreme Court upheld the constitutionality of the NSSF Act, paving the way for the phased implementation of these new rates. This decision guarantees a smooth transition and reinforces the government’s commitment to improved retirement benefits.
New NSSF Rates Effective February 2025
Effective 1 February 2025, the new contribution structure is divided into Tier I and Tier II. Tier I applies to pensionable earnings up to the lower limit, while Tier II covers earnings above that limit. The updated structure is outlined in the table below:
| Category | Year 2 (Current Rates) | Year 3 (New Rates – Feb 2025) |
|---|---|---|
| Lower Limit (Tier I) – Ksh | 7,000 | 8,000 |
| Employee Contribution (6%) – Ksh | 420 | 480 |
| Employer Contribution (6%) – Ksh | 420 | 480 |
| Total Tier I Contribution – Ksh | 840 | 960 |
| Upper Limit (Tier II) – Ksh | 36,000 | 72,000 |
| Contribution on Upper Limit (6%) – Ksh | 1,740 | 3,840 |
| Employee Contribution – Ksh | 1,740 | 3,840 |
| Employer Contribution – Ksh | 1,740 | 3,840 |
| Total Tier II Contribution – Ksh | 3,480 | 7,680 |
| Total Monthly NSSF Contributions – Ksh | 4,320 | 8,640 |
How Will the New NSSF Rates Affect Your Salary?
The increase in contribution rates means that employees will see a direct impact on their net pay. For example, an employee earning Ksh 72,000 will have deductions rise from Ksh 4,320 to Ksh 8,640. It is advisable to review your payslip in February 2025 to understand the full impact on your take-home pay.
How Will the New NSSF Rates Affect Employers?
Employers are required to match employee contributions, resulting in increased overall staffing costs. These changes add to other statutory deductions such as the Social Health Insurance Fund and the Affordable Housing Levy. Additionally, employers should update their payroll systems in accordance with the new requirements, as detailed in resources like SHA registration.
Benefits of the New NSSF Rates
Although the new rates reduce immediate net pay, they provide several long-term benefits:
- Enhanced Retirement Benefits: Higher contributions lead to larger pension savings at retirement.
- Financial Security: Promotes a savings culture among employees.
- Compliance Assurance: Ensures statutory protection for both employers and employees.
- Employee Retention: A robust pension scheme makes companies more attractive to potential hires.
How to Calculate Your NSSF Contribution (With Examples)
Example 1: Employee Earning Ksh 10,000
Pensionable Earnings: Ksh 8,000 (Lower Limit)
Employee contribution = 6% of 8,000 = Ksh 480
Employer contribution = Ksh 480
Total Contribution: Ksh 960 per month.
Example 2: Employee Earning Ksh 72,000
Pensionable Earnings: Ksh 72,000 (Upper Limit)
Employee contribution = 6% of 72,000 = Ksh 3,840
Employer contribution = Ksh 3,840
Total Contribution: Ksh 8,640 per month.
Common Questions About the New NSSF Rates
Is NSSF Mandatory?
Yes, NSSF contributions are mandatory for all employers and employees covered by the Employment Act.
Can Employers Opt Out?
Employers may choose to redirect Tier II contributions to private pension schemes, but Tier I contributions must be paid directly to NSSF.
When Will the New Rates Take Effect?
The new rates come into effect on 1st February 2025, with adjustments reflected in the February payroll.
What Happens If an Employer Fails to Comply?
Failure to remit the required contributions may result in penalties and potential legal action.
Will These Rates Increase Again?
Yes, the NSSF Act provides for gradual increases in contributions over the coming years.
Final Thoughts: Preparing for the Changes
Both employees and employers must prepare for these changes. Employees should review their salary breakdowns and adjust their budgets, while employers must update payroll systems and ensure full compliance. For more insights on financial strategies, consider reading about money market funds in Kenya.
Useful External Resources
Conclusion
The new NSSF rates effective from February 2025 promise enhanced retirement benefits by increasing contributions from both employees and employers. While this change will reduce immediate net pay, the long-term benefits include improved financial security and a stronger savings culture. For further details, consult your HR department or visit NSSF Kenya.
