1. How does the Scheme work?

Every month you will contribute a percentage of your Basic Salary into the Scheme. Over the period until retirement (or until you leave the Scheme if earlier), your contributions, along with contributions paid by the Employer on your behalf that are allocated to your retirement savings, are invested in your Member Account.

Your Contributions + Employer Contributions Allocated to Retirement Savings = Your Member Account

Your Member Account will be invested by the Trustees and will grow broadly in line with the net returns achieved each year on the investments. The value of your Member Account can go down as well as up.

At retirement the value of your Member Account will be used to provide you with an optional cash lump sum and pension for you and your dependents.

Your Member Account = Optional Cash Lump Sum + Monthly Income

The amount of your benefits at retirement will depend upon four basic factors:
1. The level of contributions you make to the Scheme
2. The contributions that the Employer makes on your behalf that are allocated to your retirement savings
3. The net investment returns credited to your Member Account
This type of pension scheme is known as a ‘money purchase’ or ‘defined contribution’ scheme.

The benefits offered are;
a. Retirement Benefits i.e
i. A pension for life
ii. Or an optional part cash lump sum and a pension for life at retirement
iii. Early and late retirement options
iv. A pension or optional lump sum on ill-health retirement.

b. Death Benefit while in service
In the event of death while in employment, a lump sum amount equal to
your Scheme Credit at the time of death will be paid to your beneficiary (ies)

c. Benefits on early exit.
If you leave before you retire;
i. A transfer to another approved pension arrangement; or
ii. A return of your contributions with interest.
iii. The 50% of the Employer’s accumulated contributions on your behalf are preserved in the Scheme and may be transferred to your new employer’s pension scheme, to a preservation scheme or an individual personal pension plan.

d. Additional Benefits
i. Tax relief on your contributions subject to Income Tax limits
ii. You may be permitted to transfer any other pension benefits into your Scheme Credit
iii. You can make additional voluntary contributions to boost your benefits

Limits on Benefits and Contributions
All aspects of the Scheme are subject to restrictions laid down by the Retirement Benefits Act 1997, 2000 and Regulations made under this Act. In addition, the Income Tax Act imposes restrictions on the tax-free benefits that may be paid from the Scheme as well as requirements on the tax treatment of contributions more than the Income Tax allowable limits on contributions. You will be notified if any of these affect you.

All full-time permanent and pensionable employees of the Employer aged over 18 who have completed their probationary period or a maximum period of one year of service with the Employer may join the Scheme.

Yes, for all eligible employees who join the Employer on or after the commencement date.

On the first day of employment.

To join the Scheme, you must complete an Application for Membership. A copy is available from the Human Resource Department. This should be filled and returned to the Employer’s Human Resource Department. You will be required to supply evidence of age or any other information as required by the Trustees of the Scheme.

The Scheme can accept transfers from other approved pension arrangements while you are in service of the Employer. Further details will be provided to anyone who is interested.

Your membership of the National Social Security Fund (NSSF) is in no way affected by being a member of the Scheme. You and the Employer will still be required to pay the statutory contributions to the NSSF, but you will be entitled to all the benefits provided under this Scheme.

Both you and the Employer contribute to the Scheme.

You will be required to pay Scheme contributions of 7.5% of your Basic Salary. Your contributions will be deducted from your Basic Salary in monthly instalments and will be paid to your Member Account.

The Employer pays an amount equal to 15% of your Basic Salary on your behalf.

Yes. These payments are known as Additional Voluntary Contributions (AVCs) and are a tax efficient way of providing extra retirement income. You can start paying AVCs on joining the Scheme or at any other time.

There are however Income Tax restrictions on the contributions that are tax deductible and you will be advised if you are affected.

More information about AVC’s is available from the Employer’s Human Resource Department.

AVC’s can be changed subject to the 1/3 rule.

Your contributions are deducted from your Salary before tax is calculated which means that full tax relief is granted without the need to claim it. There are Income Tax limits on the extent to which tax relief is available on your contributions to the scheme. In addition, there may be tax implications to you if the contributions in your respect exceed the limits on tax deductible contributions to the scheme. You will be notified if you are likely to be affected by these limits.

The Scheme’s assets are invested by the Trustees with the objective of producing a long-term return which maximizes growth while ensuring income generation and sufficient capital to meet benefit out goings.

The net returns from the Scheme’s investments will fund interest on your Member Account.

Interest will be provided on your Member account at rates determined by the Trustees on the advice of the Scheme Actuary. The Actuary will advise the Trustees on what the Interest Rate should be, based on the investment return (less expenses) achieved by the Scheme. However, the declared Interest Rate may not necessarily be equal to the Scheme’s investment return. In good years, some of the investment income may be held in reserve. These reserves are then available at times when the investment return is not good to provide a reasonable level of investment income.

The Normal Retirement Age for the Scheme is your 60th birthday but the 65th birthday for faculty members. However, provided that the Employer agrees, you may retire at any time after the age of 50 or earlier if you are in ill health. Also, if the Employer agrees, you may continue working after your Normal Retirement Age.

The benefits you will receive at retirement will depend on the size of your Scheme Credit at the time of your retirement. The pension will be secured from an Insurance Company selected by you.

You may take part of your Scheme Credit as a cash lump sum at retirement. The prescribed maximum amount by law is 1/3 of the whole benefit.

You may with the consent of the Employer retire early as a result of ill health. Your pension will depend upon the value of your Scheme Credit at the date of retirement.

If the Employer agrees, you may continue working after your Normal Retirement Age.

The Employer’s contributions to the Scheme will cease at your Normal Retirement Age. You may, however, continue contributing to your Scheme Credit until you retire.

If you die before your Normal Retirement Age while in service of the Employer, an amount equal to your Member Account at the date of your death is paid as a lumpsum to your nominated beneficiaries.

You should complete a nomination of beneficiaries’ form which asks for details of your chosen beneficiaries. The Scheme Trustees will have regard to (but are not bound by) your wishes when arranging payment of benefits. You should remember that
the Trustees are independent of the Employer.

If you die after you have left Service with an entitlement to a deferred benefit but before you have attained Normal Retirement Age, the Scheme will pay to your beneficiaries as a lump sum the amount of your benefit retained in the Scheme on leaving service with interest to the date of payment.

If you leave the service of the Employer before your Normal Retirement Age, you will have one of the following options:

a. To take a deferred benefit from the Scheme payable from your Normal Retirement Age; or
b. To take a transfer payment to another approved retirement scheme; or

c. To take your own contributions plus up to 50% of the Employer’s contributions with interest as a lump sum; and
d. The remaining portion of the Employer’s contributions with interest will need to be preserved in the Scheme until your retirement date or may be transferred to another approved scheme or a personal pension plan.

In each case, the amount of the benefit will be equivalent in value to the sum of:

a. The part of your Member Account representing the contributions which you have made to the Scheme and interest thereon on that part of the Member Account less expenses; and
b. A percentage of the part of your Member Account representing the contributions which the Employer has made to the Scheme on your behalf and interest thereon on that part of the Member Account less expenses.

From the date of joining the Scheme you are entitled to 100% of the Employer’s contributions. However, you will be able to access up to 50% of the Employers contributions and the balance will be used to get a pension for you when you attain age 50 or upon attaining the Normal Retirement Age. The deferred portion of the employer’s contributions can be transferred to any approved pension scheme of your choice even before attaining the Normal Retirement Age.

The Scheme is approved by the Commissioner of Income Tax under the Income Tax Act (Cap. 470) – ‘The Income Tax (Retirement Benefits) Rules 1994’.

Some of the tax provisions are as follows;

a. Provisions applying to Scheme Contributions
Under the current Income Tax regulations, the monthly Scheme contributions which you pay (including any AVCs) are an allowable deduction from your gross taxable income up to a maximum of KES 20,000 per month. This limit is periodically reviewed.

b. Provisions applying to Scheme Benefits
The various benefit payments made to you from the Scheme are tax exempt in the following manner:

i. On Pension payments
The first KES 300,000 per annum or KES 25,000 per month of pension received by a resident individual is exempt from tax. However, the balance of pension in excess of KES 300,000 per annum or KES 25,000 per month will be taxed under the withholding tax rates.

ii. On Cash lump sum on retirement
Assuming you’ve been in the scheme for more than 10 years, the first KES 600,000 of your Member Account taken as a lump sum is exempt from tax. However, the amount in excess of KES 600,000 will be subject to tax.

Retirement benefits due to members who are above 65 years are exempted from tax, whether payable as a cash lump sum or a monthly pension.

The Tax payable upon retirement is based on preferential tax rates which significantly reduce the tax payable compared to the PAYE rates.

iii. On Lump sum payments when leaving service
The tax-free cash lump sum is restricted to the lesser of the first KES 60,000 times the number of full years of service up to a maximum of ten years, as a member of the Scheme or the first KES 600,000. The amount in excess of these limits will be
subject to a withholding tax at prescribed rates.

Benefits accessed upon leaving service before attaining age 50 are not subjected to preferential tax rates. It is therefore more beneficial for you to retain your benefits in the Scheme until you attain age 50 or the Normal Retirement Age.

iv. On Transfers to Registered Retirement Benefits Schemes
Benefits Transferred to a registered retirement benefits Scheme will not be subjected to tax at the point of transfer. Benefits will be taxed at the point of accessing your benefits.

Once the audit of the Scheme is completed, the Scheme actuary conducts a financial review of the Scheme where the assets of the Scheme are matched against the liabilities of the Scheme.

At this point, the Trustees are then able to determine what portion of the assets is available for distribution to members. The factors that influence what portion of the income is distributed to members include the following:
 The actual income earned over the period under review
 The portion of the income that is realized and unrealized
 The Scheme’s policy on distribution of returns as will be determined from time to time.

Following the gazettement of the Retirements Benefits (Mortgage Loans) Regulations 2009 represented a significant benefit for members of retirement benefit Funds who will now be able to assign a proportion of their retirement benefits (up to 60%) without physically withdrawing from their Funds and thus have an affordable means of securing a mortgage loan for houses.

The key requirements of the regulations were as follows;
a. Retirement Funds may, but not required to offer this facility to their members through an appropriate provision in their Fund rules which needs to be approved by the RBA.
b. The Trusts Deed and Rules of the Scheme must allow for this provision for one to be able to assign benefits.
c. Direct loans from Funds will not be permitted.
d. Mortgage loans for the purposes of the regulations may only be issued by registered financial institutions approved by the RBA.
e. The assignment of Fund benefits is only permissible by a member of a Fund to:
    i) Purchase immovable property on which a house has been erected, or
    ii) Build a house on immovable property for residential purposes for which the member or spouse has the right to ownership, or
    iii) Add, alter or carry out repairs to a house for which the member or spouse has the right to ownership or meet the costs incurred (but excluding arrangement and commitment fees) in the purchase of immovable property on which to build a residential house.
f. The loan is transferable to another Scheme with a similar facility
g. The value of the guarantee that may be provided by the Scheme may not exceed the market value of the property or 60% of the accumulated Scheme benefit, whichever is the lower.

The Trustees are required by law to develop an Investment Policy Statement (IPS). An IPS is a document that guides the fund manager when investing Scheme funds. The policy provides limits of investment in each asset class that have been prescribed by the Retirement Benefits Regulations.

If you withdraw from service and opt to leave your benefits in the Scheme, the funds will continue to be invested alongside other members’ funds and will continue to grow and earn interest like the rest. No separation of funds is made.

Yes, it is possible to transfer benefits that you have accrued in another registered retirement benefits scheme to the Scheme. This is done through advising the Trustees that you have benefits in another scheme that you would like to transfer and provide the name and administrator of the Scheme. The Trustees will then forward this information to the administrator who will progress the matter. Once the funds are received they will be credited to your member account.

Statements are issued after completion of audit. The Retirement Benefits Regulations stipulate that members should get their statements within six months of end of financial year.

The Retirement Benefits Regulations stipulate that members should be paid within thirty days of leaving service.

It is the members’ responsibility to ensure that they complete the clearing process required by the Employer in order for Trustees to have sufficient documentation, verified by the Sponsor to confirm that a member has left service.