When National Social Security Fund (NSSF) released its 2023/24 financial statements, the Auditor General’s office was already sifting through a baffling bond transaction. Nancy Gathungu, Kenya’s Auditor General, flagged that the fund bought Treasury bonds worth Sh5.1 billion at face value and sold them for just Sh4.3 billion, sinking nearly Sh789 million of contributors’ retirement savings. The loss sparked a parliamentary probe, putting the fund’s investment governance under a microscope.
Background: NSSF’s investment mandate
The National Social Security Fund operates under the 2020 Investment Policy Statement, which mandates “prudent” investments that maximise returns for contributors. In theory, the fund should diversify across government securities, equities, and fixed‑income instruments while keeping risk in check.
However, the audit uncovered that six external fund managers were given “full discretion” over bond purchases, a practice that runs counter to the policy’s emphasis on oversight. The managers, whose identities were not disclosed, allegedly executed trades without a clear risk‑return analysis.
The treasury bond deal gone wrong
According to the Auditor General’s report, the problematic trades occurred between May and July 2024. NSSF bought Treasury bonds for a total nominal value of Sh5.2 billion but off‑loaded them for Sh4.32 billion, creating a shortfall of Sh789.2 million. The loss burrowed deeper because the bonds were purchased at a premium of Sh500.7 million above market rates, a detail that the fund has yet to explain.
- Purchase price: Sh5.2 billion (nominal)
- Sale price: Sh4.32 billion
- Net loss: Sh789.2 million
- Premium paid above market: Sh500.7 million
- Policy breached: 2020 Investment Policy Statement
Even more striking, the fund’s own records showed a mismatch between the bank statements and the internal ledger, suggesting that the loss was not merely a market fluctuation but a product of poor timing and inadequate supervision.
Parliamentary hearing and key testimonies
On 15 August 2024, the Public Investments Committee on Social Services, Administration and Agriculture (PIC‑SSAA) summoned NSSF CEO David Koross to answer for the bond debacle. The hearing, chaired by Caleb Amisi, the Saboti MP, turned into a tense exchange.
"We're talking about Sh12 billion in bond transactions," Amisi warned. "Was this really the most efficient way to invest public funds?" Koross struggled to provide a concrete rationale, merely pointing to the six external managers as the decision‑makers.
Amisi pressed further, asking why the fund did not hedge against price volatility or why it ignored the policy’s capital‑loss safeguards. Koross admitted that the fund’s internal risk team had raised flags, but those concerns were allegedly overruled by the managers seeking higher yields.
Broader financial irregularities uncovered
The bond loss was just the tip of the iceberg. The Auditor General’s report also highlighted:
- Tax refunds worth Sh940.3 million written off due to delayed reconciliation and missing paperwork.
- A desktop computer purchased for the reception area at a cost of Sh2.08 million — a price more than ten times the market rate for comparable units.
- An Upper Hill land parcel bought for Sh115 million that later had its title deed revoked in April 2010 because the land was earmarked for public use. Upper Hill is a prime commercial district in Nairobi.
- Investments in two private companies that saw their valuations drop by 17.64%, wiping out Sh27.2 million of members’ capital.
- Shares in a loss‑making bank valued at Sh38.4 million, with no clear evidence of value‑for‑money.
While NSSF’s net revenue surged 228.9% to Sh42.3 billion, operating costs also ticked up, and the expense‑to‑asset ratio slipped to 2.4%, still above the 2.0% ceiling set by the National Social Security Fund Act, 2013.
Implications for pensioners and future oversight
For the average Kenyan contributor, the bond loss translates into a modest reduction in future pension payouts, but the symbolic damage is far larger. Trust in the fund’s stewardship is eroding, and the parliament is now weighing the need for stricter legislative controls.
Experts suggest three immediate steps:
- Re‑centralise investment decision‑making within NSSF’s internal risk committee.
- Introduce real‑time audit trails for all large‑value transactions.
- Mandate independent external reviews of any investment that exceeds Sh1 billion.
If these reforms are adopted, they could restore confidence and safeguard the retirement savings of the nation’s workforce.
Frequently Asked Questions
How does the bond loss affect my future pension?
The Sh789 million shortfall will be spread across roughly 10 million contributors, shaving off only a few hundred shillings from each member’s eventual monthly payout. However, the loss signals weaker investment returns, which could compound over time if similar missteps recur.
Why were external fund managers given full discretion?
NSSF’s 2020 policy allowed outsourcing to specialist managers to achieve higher yields. In practice, the delegation was too broad, with six managers operating without a unified risk framework, a breach that the Auditor General highlighted.
What legal limits does the NSSF have on expenses?
Section 50 of the National Social Security Fund Act, 2013 caps total expenses at 2.0% of assets in the first six years and 1.5% thereafter. NSSF’s expense ratio of 2.4% in FY 2023/24 breached this threshold, exposing the fund to potential sanctions.
What steps are being taken to prevent future bond losses?
Parliament’s PIC‑SSAA is drafting amendments that would require any bond purchase above Sh1 billion to receive prior approval from an independent audit committee, alongside stricter reporting to the Auditor General.
Is the NSSF still financially healthy despite the losses?
On paper, the fund’s net revenue grew to Sh42.3 billion, but the rising expense ratio and the erosion of reserves from the bond and other mis‑investments raise concerns about long‑term sustainability unless governance reforms are enacted.
1 Comments
Jauregui Genoveva
October 7 2025
It’s infuriating to see a pension fund treat people’s retirement like a casino, especially when the government claims it champions the poor. 🙄 The loss isn’t just numbers; it’s trust being ripped apart.