NSSF Tier I & Tier II 2026: What Changed in Phase 4 (KES 108,000 Upper Limit Explained)

If you've noticed a bigger NSSF deduction on your February 2026 payslip, you're not imagining it. The National Social Security Fund (NSSF) entered Phase 4 of its five-year phased implementation under the NSSF Act, 2013, raising both the Lower Earnings Limit (Tier I) and Upper Earnings Limit (Tier II).

The most talked-about change? The Upper Earnings Limit jumped from KES 72,000 to KES 108,000, meaning high earners now contribute more toward their retirement. Meanwhile, the Tier I limit rose modestly from KES 8,000 to KES 9,000.

In this guide, I'll walk you through exactly what Tier I and Tier II mean, how the new limits affect your take-home pay, and why the KES 108,000 figure matters. I'll also show you how to calculate your NSSF deduction using real salary examples.

Last Updated: July 2026

What Are NSSF Tier I and Tier II?

The NSSF Act, 2013 transformed Kenya's social security system from a simple provident fund into a two-tier pension scheme designed to provide better retirement, invalidity, and survivor benefits. Under this structure, your pensionable earnings are split into two bands:

• Tier I (Lower Earnings Limit): Covers the first portion of your salary, up to a statutory minimum.
• Tier II (Upper Earnings Limit): Covers earnings between the lower limit and a higher statutory cap.

Both tiers attract a 6% employee contribution and a 6% employer matching contribution, totaling 12% of your pensionable earnings within the defined limits.

Why Two Tiers?

Tier I is mandatory and cannot be redirected—it ensures every worker builds a basic retirement cushion. Tier II, however, can be "contracted out" to approved private pension schemes if your employer offers one, giving you flexibility to potentially earn higher returns while still meeting statutory requirements.

The 2026 Phase 4 Changes: What Actually Shifted

Effective 1 February 2026, the NSSF contribution limits were adjusted as part of the fourth phase of the five-year rollout prescribed in the Third Schedule of the NSSF Act, 2013. Here's what changed:

The KES 108,000 Upper Limit: Why It Matters

The jump from KES 72,000 to KES 108,000 in Tier II is the headline change. For employees earning above KES 72,000, this means a higher portion of their salary is now subject to the 6% NSSF deduction.

For example, someone earning KES 100,000 per month previously had Tier II contributions calculated on KES 64,000 (KES 72,000 − KES 8,000). Now, Tier II applies to KES 91,000 (KES 100,000 − KES 9,000), significantly increasing their monthly deduction.

Who Is Most Affected?

• Low and mid earners (below KES 72,000): Minimal to no change, as their entire salary was already within the pensionable range.
• High earners (above KES 72,000): Noticeable increase in NSSF deductions, capped at KES 6,480 for employees earning KES 108,000 or more.

How to Calculate Your NSSF Contributions in 2026

The calculation is straightforward once you understand the tiers. Here's the formula:

Tier I Contribution = 6% × Lower Earnings Limit (KES 9,000) = KES 540 (employee) Tier II Contribution = 6% × (Pensionable Salary − KES 9,000), capped at KES 99,000 = up to KES 5,940 (employee)

Total Employee Contribution = Tier I + Tier II (max KES 6,480) Total Employer Contribution = Same as employee (max KES 6,480)

Real Salary Examples

Let's break this down with three common salary levels:

Example 1: Salary of KES 50,000

• Tier I: 6% × KES 9,000 = KES 540
• Tier II: 6% × (KES 50,000 − KES 9,000) = 6% × KES 41,000 = KES 2,460
• Total Employee NSSF: KES 540 + KES 2,460 = KES 3,000
• Employer Match: KES 3,000
• Combined: KES 6,000

Example 2: Salary of KES 100,000

• Tier I: 6% × KES 9,000 = KES 540
• Tier II: 6% × (KES 100,000 − KES 9,000) = 6% × KES 91,000 = KES 5,460
• Total Employee NSSF: KES 540 + KES 5,460 = KES 6,000
• Employer Match: KES 6,000
• Combined: KES 12,000

Example 3: Salary of KES 150,000 (Above the Cap)

• Tier I: 6% × KES 9,000 = KES 540
• Tier II: Capped at 6% × KES 99,000 = KES 5,940 (since KES 150,000 − KES 9,000 exceeds the KES 99,000 Tier II band)
• Total Employee NSSF: KES 540 + KES 5,940 = KES 6,480 (maximum)
• Employer Match: KES 6,480
• Combined: KES 12,960

Quick Reference Table: NSSF Deductions by Salary Band (2026)

The Upper Limit Saga: KES 108,000 vs. KES 72,000

You may have heard conflicting reports about whether the Upper Earnings Limit would be KES 72,000 or KES 108,000 in 2026. Here's what happened:

The NSSF Act, 2013 Third Schedule originally outlined a five-phase rollout where the Upper Earnings Limit would rise annually, eventually reaching four times the national average earnings by Phase 5. Early projections suggested KES 108,000 for Phase 4 (2026), but some employers and payroll providers initially prepared for KES 72,000, citing transitional guidance.

However, the official position confirmed by NSSF and major tax advisory firms like KPMG and RSM is clear: Phase 4 (effective February 2026) uses KES 108,000 as the Upper Earnings Limit. This aligns with the statutory schedule and ensures consistency across payroll systems.

Why the Confusion?

The ambiguity stemmed from:

• Phased implementation complexity: Employers were adjusting to annual changes since 2023, leading to misinterpretation of the schedule.
• Transitional communications: Some early advisories referenced KES 72,000 as a "safe harbor" figure before the final gazette.
• Payroll system updates: Not all software providers updated their NSSF modules simultaneously, causing temporary discrepancies.

By mid-2026, the KES 108,000 limit is firmly established, and employers are expected to comply to avoid penalties.

Impact on Your Payslip: What to Expect in 2026

If you earn KES 72,000 or below, your NSSF deduction remains largely unchanged, as your entire salary was already within the pensionable range under Phase 3.

However, if you earn above KES 72,000, expect a higher NSSF deduction. For instance:

• A KES 100,000 earner now pays KES 6,000 (up from KES 4,320 in 2025).
• A KES 150,000 earner pays the maximum KES 6,480 (up from KES 4,320).

This reduction in take-home pay is offset by higher retirement savings, as the additional contributions accumulate with investment returns over time.

Other Statutory Deductions to Consider

Remember, NSSF is just one of several statutory deductions on your 2026 payslip. Others include:

• SHIF (Social Health Insurance Fund): 2.75% of gross salary
• Housing Levy: 1.5% of gross salary
• PAYE (Pay As You Earn): Progressive tax bands on taxable income

For a KES 100,000 salary, total statutory deductions (NSSF, SHIF, Housing Levy, PAYE) can exceed KES 30,000, leaving a net pay of approximately KES 70,442.

When Can You Access Your NSSF Benefits?

Understanding when you can withdraw your NSSF savings is crucial for retirement planning. Under the NSSF Act, 2013:

• Age Retirement: You become eligible at 50 years (early retirement) or 60 years (normal retirement).
• Withdrawal Benefit: If you retire from formal employment after age 50, you can claim your accrued contributions plus returns.
• Early Withdrawal: Generally restricted before age 50, except in cases of permanent disability, emigration, or death (survivor benefits).

Important Note on Private Schemes

If you've "contracted out" your Tier II contributions to a private pension scheme, withdrawal rules may differ. For example, the Retirement Benefits Authority (RBA) limits early access to 50% of your portfolio if you resign before age 50, with the remainder locked until legal retirement age.

Compliance Deadlines and Penalties

Employers must remit NSSF contributions by the 9th of the month following the payroll month. Failure to comply can result in:

• Penalties: 5% of unpaid contributions per month
• Interest: 2% per month on arrears
• Legal action: NSSF can prosecute non-compliant employers under the NSSF Act, 2013

To stay compliant:

1. Update payroll systems to reflect the KES 9,000 and KES 108,000 limits
2. Communicate changes to employees before February 2026 (or immediately if retroactive adjustments are needed)
3. Reconcile deductions monthly to avoid arrears

Looking Ahead: Phase 5 (2027) and Beyond

Phase 4 is not the final step. The fifth and final phase, expected in February 2027, will lock in the permanent structure:

• Lower Earnings Limit: Tied to the gazetted average statutory minimum monthly basic wage
• Upper Earnings Limit: Set at four times the national average earnings

This ensures NSSF contributions keep pace with inflation and wage growth, providing sustainable retirement benefits for future generations.

Final Thoughts

The 2026 NSSF changes—particularly the KES 108,000 Upper Earnings Limit—are a significant shift for high earners and employers alike. While the higher deductions may pinch your take-home pay, they're designed to bolster your retirement security in line with the NSSF Act, 2013's vision.

By understanding Tier I and Tier II, calculating your contributions accurately, and staying compliant with remittance deadlines, you can navigate these changes confidently. Use the salary and PAYE calculators on this site alongside the worked examples above to check your own payslip.

This article is for educational purposes only and does not constitute professional advice. Consult a qualified professional for your specific situation.