Is NSSF Halal? (2026): Tier I, Tier II and Kenya's Shariah Pension Options

NSSF is a compulsory statutory fund, not a contract you chose, and most scholars treat a legally compelled contribution as outside the member's responsibility; the benefit you receive at 60 is lawful to take, with purification of the part that comes from interest-bearing assets recommended by the cautious view. What you can change is where the larger Tier II slice goes. Under section 21 of the NSSF Act 2013 an employer may contract Tier II contributions out to an RBA-approved scheme, and two Shariah-compliant options exist on the RBA register: CPF's Salih fund inside the County Pension Fund and TIA's Takaful Umbrella Fund. Tier I, the first Sh 1,080 a month in 2026, always stays with NSSF.

What NSSF takes from your payslip in 2026

Section 20 of the National Social Security Fund Act (Cap 258) sets the contribution at 6% of pensionable earnings from the employee and a matching 6% from the employer, phased in over five years under the Third Schedule. NSSF's notice to employers for Year 4, which it says took effect in February 2026 after Year 3 rates ended on 31 January 2026, prints the figures: a Lower Earnings Limit of Sh 9,000, so Tier I is 6% of that, Sh 540 from the employee and Sh 540 from the employer, a maximum of Sh 1,080 a month; an Upper Earnings Limit of Sh 108,000, so Tier II is 6% of the Sh 99,000 between the two limits, Sh 5,940 each, a maximum of Sh 11,880; and a maximum total NSSF contribution of Sh 12,960 per employee per month. Employers remit by the ninth day of the following month.

The Act defines Tier I as contributions on pensionable earnings up to the Lower Earnings Limit and Tier II as contributions on earnings above it, up to the Upper Earnings Limit. The Third Schedule's progression table shows why the numbers keep rising: Year 1 set the lower limit at Sh 6,000 and the upper at half of national average earnings, Year 4 sets Sh 9,000 and three times national average earnings, and from Year 5 the lower limit becomes the gazetted average statutory minimum wage and the upper limit four times national average earnings. Anyone planning a retirement strategy around NSSF should expect the Tier II deduction to grow again in 2027.

What NSSF invests in, as published

NSSF's own FAQ answers the question directly: the Fund invests members' savings in government securities, real estate and shared equities. Its investments page adds the scale: total investments rose from about Sh 308 billion in December 2022 to around Sh 558 billion by June 2025, with net investment income of about Sh 105.3 billion in 2024/25 and a stated ambition of about Sh 1 trillion in assets by 2027/28. The AGM report of 11 March 2026 puts total assets at approximately Sh 575 billion, member contributions at Sh 84 billion, and membership at about 3.6 million active members and more than 77,000 employers.

NSSF does not publish an asset allocation table on these pages, so we cannot say what share is government paper. What the pages establish is that interest-bearing Treasury bonds and bills are a core holding alongside property and NSE shares that are not Shariah-screened, so the 17% net interest declared for 2024/25, up from 11% the year before, is a return on a mixed and partly interest-based portfolio. The Act itself does not promise a rate: it defines interest as investment income credited to member accounts at rates the Board determines at least annually, in consultation with the actuary, having regard to the income on the Fund's assets. In contract terms that makes the credit a discretionary share of results rather than a fixed loan return, which matters for the ruling below.

Is NSSF halal? The positions

Three positions cover the ground. The first, held by many scholars who have looked at compulsory state social security schemes, is that the member is not a party to a riba contract of their own choosing; the law takes the money and the law returns a benefit, so the retirement benefit is lawful to receive in full. The second, more cautious, accepts the contributions as compelled but treats the credited return as mixed: the member should estimate the share attributable to interest and give that portion to charity on receipt, keeping the contributions and the share from property and lawful business. The third, held by a minority, says the member should take back only contributions plus a conservative estimate of lawful growth and give away the rest.

All three agree on the practical points. You may not refuse to contribute, because registration and deduction are legal duties on the employer. You should not add voluntary contributions on top of the compulsory ones if a Shariah alternative exists, because voluntary money is a choice. And where the law offers a route to move part of the money into a Shariah-compliant scheme, taking it is the obvious step. Our is-it-halal hub applies the same logic to other compulsory deductions.

Tier II contracting out: what the Act and the RBA say

Section 21 of the Act lets an employer opt to pay Tier II contributions into a contracted-out scheme it participates in or establishes. The employer must write to the Retirement Benefits Authority at least sixty days before contracting out, setting out the scheme's details; the RBA responds in writing within thirty days if the scheme meets the Reference Scheme Test in the Fourth Schedule; on approval, the employees' Tier II Pension Fund Credits are transferred from NSSF to the scheme; and the scheme must keep a record of Protected Rights and pay them in the same form the Act requires. Subsection (3) is the limit: an employer shall pay Tier I contributions to the Pension Fund, always.

The RBA's notice to stakeholders of 13 February 2023 states that, following the Court of Appeal decision of 3 February 2023, the NSSF (Contracting Out by Employers) Regulations 2014 are in effect, that employers apply using Form C1 with its attachments, and that a scheme must meet the Reference Scheme Test and receive a Reference Scheme Certificate before it can take Tier II money. The Fourth Schedule requires the scheme to be registered by the RBA, registered with KRA as an exempt scheme, compliant with the RBA investment guidelines, and, for a defined contribution scheme, to pay Protected Rights as a pension or income drawdown, portable only to another contracted-out scheme or back to NSSF.

• The employer resolves to contract out and chooses a scheme that holds, or can obtain, an RBA Reference Scheme Certificate.
• The employer notifies the affected employees, the scheme's trustees and administrator, and any recognised union in writing, stating the scheme, the effective date and how contributions and benefits will change (regulation 5 of the 2014 Regulations).
• The employer files Form C1 with the RBA at least sixty days before the intended date, attaching the board resolution, the trustees' consent to receive Tier II money, the administrator's or actuary's declaration that the scheme meets the Reference Scheme Test, and the employee notice.
• The RBA decides within thirty days and issues a contracting-out certificate naming the employer, the scheme, the employee categories and the effective date, with a copy to NSSF.
• The employer applies to NSSF for transfer of the existing Tier II Fund Credits, which the Regulations say NSSF transfers within sixty days of the application, without interest.
• From the effective date, Tier II contributions go to the scheme and Tier I continues to NSSF; the scheme shows Tier II amounts separately on each member's annual statement.

One point in the 2014 Regulations matters for a Muslim employee who wants to ask HR for this. The employer may contract out all staff or only a particular description of employees, but it must not discriminate between employees on any ground other than the nature of their employment. A carve-out for Muslim staff alone is not what the regulation contemplates, so the practical request is that the employer adopt a Shariah-compliant scheme for the whole workforce or a job category, or offer a Shariah sub-fund inside the scheme it already uses.

CPF Salih: the Shariah fund inside a county pension scheme

CPF Financial Services administers the County Pension Fund, and the Fund's 2022 annual report on cpf.or.ke states that it registered a product called Salih with the RBA in 2018 under the RBA rules to serve members who prefer Shariah-compliant investment, and that the report presents the conventional fund, the Salih fund and a post-retirement medical fund separately. The report's Shariah governance statement, signed for the corporate trustee, says a Shariah Advisory Committee appointed by the trustee vets proposed investments and agreements, advises the board, reviews the compliance manual and reports on Shariah investments. Salih's own site, cpfsalih.com, names the service chain: a board of trustees with a Salih advisory committee, Co-op Trust as fund manager, CPF as administrator of the sub-fund and Equity Bank as custodian, with offices listed in Nairobi, Mombasa, Kisumu, Eldoret, Meru, Nakuru, Garissa, Nyeri and Bungoma.

CPF's defined contribution page states the scheme's eligibility as employees of participating sponsors, county governments and associated organisations, with a minimum employee contribution of 5% and a maximum employer contribution of 20% of pensionable salary, and benefits payable at the mandatory age of 60 or on early retirement between 50 and 60. Neither the CPF site nor the Salih site states whether the County Pension Fund holds a Reference Scheme Certificate for NSSF Tier II, nor publishes Salih's current fund size or return, so those are questions to put to CPF directly. The CPF Salih guide covers what the fund publishes about itself; for an individual saver CPF's M-Pension individual plan, with contributions from Sh 500 a month through paybill 921125, is the entry route, and you should ask for it to be placed under Salih.

The other umbrella: TIA's Takaful Umbrella Fund

The RBA's published list of registered umbrella retirement benefits schemes includes the Takaful Umbrella Fund, sponsored by Takaful Insurance of Africa, which TIA describes as the first Shariah-compliant retirement benefits scheme in East and Central Africa. An umbrella scheme is exactly the vehicle the Act's definition of a contracted-out scheme contemplates. As with Salih, confirm with the administrator that the scheme holds a Reference Scheme Certificate before the employer files Form C1; the TIA umbrella fund guide reviews the scheme and the verification checklist for Shariah pension claims lists what to ask.

Voluntary members, Haba Haba and the self-employed

Section 23 of the Act lets a self-employed person join NSSF as a voluntary member of the Provident Fund with a minimum of Sh 200 per contribution and at least Sh 4,800 a year, payable by mobile money, and NSSF's Haba Haba service on *254# accepts as little as Sh 25 a day, splitting each contribution 30% into short-term savings and 70% into long-term savings, with half of the long-term portion available after five years. None of this is compulsory, so a self-employed Muslim faces a choice rather than a deduction, and the positions above point one way: put voluntary retirement money into a Shariah-screened scheme, such as Salih through M-Pension, rather than into a fund that holds Treasury bonds. The retirement planning guide for Kenyan Muslims compares the voluntary routes.

The decision

If you are employed, accept Tier I as a compulsory deduction you cannot change, and when the benefit is paid at 60 follow the position you trust on purifying the interest-derived share. Then take the Tier II question to your employer in writing: ask whether the company has or will apply for a contracting-out certificate, propose CPF's County Pension Fund with its Salih option or TIA's Takaful Umbrella Fund as the scheme, and ask the administrator to confirm in writing that the scheme holds an RBA Reference Scheme Certificate. In 2026 that moves up to Sh 11,880 a month per employee, more than ninety per cent of the total contribution, out of a mixed portfolio and into a screened one.

If you are self-employed, do not make voluntary NSSF contributions while a screened alternative exists; open an individual Shariah pension instead and keep NSSF membership dormant. If you are an employer with Muslim staff, a Shariah-compliant umbrella scheme for the whole workforce satisfies the non-discrimination rule and the Reference Scheme Test at once. For the zakat treatment of whatever accumulates, see the zakat on retirement savings article. Facts checked against nssf.or.ke, rba.go.ke, cpf.or.ke, cpfsalih.com, kenyalaw.org on 30 September 2026.

Frequently asked questions

Can I opt out of NSSF completely as a Muslim?

No. Registration and contribution are legal duties on every employer and employee under the NSSF Act, and section 21(3) requires Tier I contributions to be paid to the NSSF Pension Fund in every case. The only movable part is Tier II, and only through the employer, which must obtain an RBA contracting-out certificate for an approved scheme. Voluntary and Haba Haba contributions are the parts entirely within your choice.

How much is Tier I and Tier II in 2026?

NSSF's Year 4 notice sets the Lower Earnings Limit at Sh 9,000, so Tier I is Sh 540 from you and Sh 540 from your employer, Sh 1,080 in total. The Upper Earnings Limit is Sh 108,000, so Tier II is 6% of the Sh 99,000 above the lower limit, Sh 5,940 each, Sh 11,880 in total. The maximum combined contribution is Sh 12,960 a month, remitted by the ninth of the following month.

Is the 17% NSSF return interest?

NSSF calls it interest, and the 17% for 2024/25 was declared at the AGM on 6 February 2026, up from 11%. In the Act, interest means investment income credited to member accounts at a rate the Board sets annually having regard to the Fund's income, so it is a discretionary allocation of results, not a promised loan rate. The income itself comes from a portfolio that NSSF describes as government securities, real estate and shares, so part of it derives from interest-bearing paper.

Can my employer move only Muslim employees' Tier II to a Shariah scheme?

The 2014 Contracting Out Regulations allow an employer to contract out all employees or a particular description of employees, but forbid discriminating between employees on any ground other than the nature of their employment. Religion is not the nature of employment, so the realistic request is that the employer adopt a Shariah-compliant scheme for a job category or for everyone, or use a scheme that offers a Shariah sub-fund members can select, as the County Pension Fund does with Salih.

Does CPF Salih accept NSSF Tier II contributions?

Salih is a Shariah-compliant product registered with the RBA inside the County Pension Fund, which is an RBA-registered scheme, so it is the kind of scheme the Act contemplates. Whether the County Pension Fund currently holds a Reference Scheme Certificate for Tier II is not stated on cpf.or.ke or cpfsalih.com, and it is the first question an employer should put to CPF in writing before filing Form C1 with the RBA.

What happens to my existing NSSF Tier II balance if my employer contracts out?

Once the RBA issues the contracting-out certificate, the employer applies to NSSF for transfer of each employee's Tier II Fund Credit to the new scheme, and the Regulations say NSSF transfers it within sixty days, without interest on the transfer. Tier I credits stay with NSSF. In the new scheme the transferred money is recorded as Protected Rights, shown separately on your annual statement, and must be paid as a pension or income drawdown under the same preservation rules.