NSSF Tier II Contracting-Out
Did you know that your business can legally redirect NSSF Tier II contributions to an approved private pension scheme? Under the NSSF Act, 2013, eligible employers in Kenya can contract out of NSSF Tier II and remit those contributions to an approved retirement benefits scheme instead, while staying compliant with statutory NSSF requirements.
At Wysline Insurance Agency, we help SMEs, corporates, schools, NGOs and other employers understand their NSSF Tier II obligations, evaluate suitable retirement schemes and navigate the contracting-out process, while supporting employees' long-term financial wellbeing.
Book A ConsultationSix Benefits Of NSSF Tier II Contracting-Out
Greater Visibility Of Retirement Savings
Approved private schemes may offer individual member accounts, periodic statements and digital platforms to track contributions and growth.
Professionally Managed Investments
Employees may benefit from professionally managed, diversified portfolios and guaranteed-fund options. Returns and guarantees depend on the scheme.
Enhanced Employee Financial Wellbeing
Structured retirement savings help employees build long-term financial discipline and prepare for life after employment.
Opportunities To Grow Savings
Some schemes allow Additional Voluntary Contributions (AVCs) beyond Tier II, which may qualify for tax relief.
Flexible Pension Portability
When employees change jobs, savings may stay in the scheme or transfer to another eligible arrangement, subject to scheme rules and regulations.
Personalised Pension Education
Through Wysline, employers access pension guidance and financial wellness education that supports better retirement decisions.
What Is NSSF Tier II Contracting-Out?
The National Social Security Fund (NSSF) operates a two-tier contribution system under the NSSF Act, 2013:
- Tier I — mandatory contributions on earnings up to the Lower Earnings Limit (LEL). Employer and employee each contribute 6%, remitted directly to NSSF.
- Tier II — contributions on pensionable earnings between the Lower Earnings Limit (LEL) and Upper Earnings Limit (UEL). Employer and employee each contribute 6%, and eligible employers may redirect these to an approved retirement benefits scheme.
Important: contracting-out does not exempt an employer from mandatory pension contributions. It allows qualifying Tier II contributions to be managed through an approved alternative pension scheme.
Understanding NSSF Contributions In 2026
Based on the 2026 contribution structure outlined in NSSF training materials. For employees earning KSh 108,000 or more a month, the illustrated maximum Tier II contribution is shown below.
| Contribution Category | Monthly Amount |
|---|---|
| Lower Earnings Limit (LEL) | KSh 9,000 |
| Upper Earnings Limit (UEL) | KSh 108,000 |
| Employee contribution rate | 6% |
| Employer contribution rate | 6% |
| Maximum Tier II — employee | KSh 5,940 |
| Maximum Tier II — employer | KSh 5,940 |
| Combined maximum Tier II | KSh 11,880 per month |
These contributions may be directed to an approved private pension scheme following successful contracting-out. Contribution limits are subject to statutory revisions and applicable regulatory requirements.
How Wysline Helps You Get Started
Initial Consultation
We assess your current NSSF contributions, workforce structure and existing pension arrangements.
Pension Scheme Evaluation
We help you explore eligible schemes and understand their features, investments, charges and member benefits.
Contracting-Out Guidance
We coordinate with the selected provider to support the application, documentation and approval process.
Employee Onboarding And Education
Once approvals are obtained, we help onboard employees and explain the new pension arrangement.
Ongoing Advisory Support
We continue supporting you with pension education, provider coordination and retirement planning guidance.
Who Can Benefit From NSSF Tier II Contracting-Out?
Our advisory services suit employers across different sectors, including:
- Small and medium-sized enterprises (SMEs)
- Corporate organisations
- Private and international schools
- Universities and colleges
- NGOs, churches and charitable organisations
- SACCOs and microfinance institutions
- Hospitals, clinics and healthcare providers
- Manufacturing and agricultural businesses
- Professional firms, including law, audit and accounting practices
- Hospitality, construction and real estate businesses
Whether your organisation has a small team or a large workforce, we can help you assess the suitability of NSSF Tier II contracting-out.
Why Choose Wysline For NSSF Tier II Contracting-Out?
Personalised Pension Advisory
We understand your organisation, workforce, existing pension arrangements and objectives before recommending options.
Guidance On Regulatory Compliance
We help you understand the contracting-out requirements and coordinate the processes with approved scheme providers.
Access To Established Providers
We help you evaluate suitable arrangements, including eligible umbrella retirement benefits schemes.
Employee Financial Education
We help employees understand retirement savings, contributions, financial protection and long-term wealth creation.
Ongoing Client Support
We remain available to guide you, coordinate with providers and support employees with pension enquiries.
Integrated Employee Benefits
We also help with WIBA, Group Personal Accident, Group Life Assurance, Staff Medical Insurance and extra retirement savings.
Frequently Asked Questions
Is NSSF Tier II contracting-out legal in Kenya?
Yes. The NSSF Act, 2013 permits qualifying employers to contract out of Tier II contributions through approved retirement benefits schemes that meet the applicable requirements.
Can an employer opt out of all NSSF contributions?
No. Tier I contributions remain mandatory and must be remitted to NSSF. Only qualifying Tier II contributions may be redirected through an approved contracting-out arrangement.
Can small businesses participate?
Yes. Eligible SMEs can explore contracting-out arrangements, including approved umbrella pension schemes designed to accommodate multiple employers.
Does contracting-out reduce mandatory pension contributions?
No. Contracting-out changes where qualifying Tier II contributions are remitted; it does not remove the employer's or employee's statutory contribution obligations.
Can employees make additional pension contributions?
Yes. Depending on the selected scheme, employees may make voluntary contributions to increase their retirement savings, subject to scheme rules and applicable tax provisions.
What happens when an employee leaves employment?
Depending on the applicable rules, employees may retain their pension benefits in the existing scheme or transfer them to another eligible retirement benefits arrangement.
Does Wysline Insurance Agency manage the pension funds?
No. Wysline provides pension advisory and facilitation services. Contributions are managed by the selected approved retirement benefits scheme and its appointed service providers.
Book Your NSSF Tier II Consultation
Your employees work hard for your organisation. Help their retirement savings work towards their future. We simplify the process through personalised guidance, financial education and access to suitable retirement solutions.