2026 NSSF Tier 1 and 2 Contribution Increase. What You Need to Know
Starting February 2026, Kenya will enter the next phase of its multi‑year implementation of the National Social Security Fund (NSSF) Act, 2013, resulting in higher contributions, mainly due to a rise in the Tier II contribution ceiling. This is part of ongoing pension reforms aimed at strengthening retirement savings for workers but also increases statutory payroll costs for employers and employees alike.
Background: The NSSF Act and Tiered Contributions
The NSSF Act, 2013 restructured Kenya’s retirement contributions from a single flat rate to a two‑tier system:
- Tier I: A base level contribution on lower earnings (protects basic retirement savings).
- Tier II: An additional contribution on earnings above the base level up to a specified upper limit (boosts long-term savings).
Under this system, both employee and employer each contribute 6% of pensionable earnings, for a total of 12% into the retirement fund.
What is Changing in 2026?
Effective February 2026:
- Tier I Lower Earnings Limit (LEL) increases from KSh 8,000 to KSh 9,000.
- Tier II Upper Earnings Limit (UEL) rises from KSh 72,000 to KSh 108,000.
How Contributions Will Change
Employees
- Lower-income earners (below ~KSh 50,000) will see little or no change in take-home pay.
- Middle earners (~KSh 100,000 per month) will see their employee NSSF portion increase from around KSh 4,320 to ~KSh 6,000.
- Higher earners (~KSh 108,000+) will reach the new ceiling, meaning their Tier II share rises to ~KSh 6,480.
Employers
Employers match the 6% contributions for each employee under both tiers, so employer contributions rise in line with employees’ as limits increase.
Impact on Payslips and Take-Home Pay
- High-earners could see take-home pay fall by over KSh 2,000 per month.
- Total monthly NSSF contributions (employee + employer) for higher earners can reach KSh 12,960.
Rationale — Why the Increase?
Supporters argue that the increases:
- Enhance long-term retirement incomes.
- Align Kenya’s pension framework with international best practices.
- Expand retirement savings for higher-earning employees.
Critics contend the increases reduce disposable income and raise business costs.
Compliance and Payroll Preparation
- Employers must update payroll systems before February 2026.
- Ensure employee payslips reflect accurate deductions and remittances.
- Submit NSSF remittances within statutory deadlines to avoid penalties.
In Summary
| Component | 2025 Limit | 2026 Limit |
|---|---|---|
| Tier I LEL | KSh 8,000 | KSh 9,000 |
| Tier II UEL | KSh 72,000 | KSh 108,000 |
| Max Employee Contribution | ~KSh 4,320 | ~KSh 6,480 |
| Max Employer Contribution | ~KSh 4,320 | ~KSh 6,480 |
| Total Monthly Contribution | ~KSh 8,640 | KSh 12,960 |
Final Thoughts
The Tier II increase for 2026 marks a key step in Kenya’s NSSF reforms. While it strengthens long-term retirement savings, it also impacts take-home pay and business payroll costs. Employees and employers should plan ahead for a smooth transition.
Learn More About NSSF Tier II Contracting Out
For detailed guidance on NSSF Tier II contracting‑out options and how they can benefit your retirement planning, visit our dedicated page on our website:
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If you have any questions about NSSF Tier II contributions or need personalized guidance, feel free to reach out to us via our Contact Us page:
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