A member can make additional voluntary contributions. The portion of your salary that you contribute to the scheme is normally deducted from your salary before taxation. There however exists a limit to the amount that is tax-free. Presently the limit on contributions is Ksh 20,000 but this is reviewed periodically by the government.
The table below shows the advantages of Additional voluntary contributions (AVC) in relation to tax calculation. For the illustration purposes the three members earn the same salary, Member A makes the mandatory and additional voluntary contributions of five percent (5%), Member B makes only the mandatory contributions, Member C makes no contributions.
|Member A||Member B||Member C|
|Pension contributions – 5%||2,500||2,500||–|
|Additional Voluntary Contributions -5%||2,500||–||–|
|Statutory contributions- NSSF||200||200||200|
|Non taxable income||5,200||2,700||200|
|Tax payable -before reliefs||13,144||13,894||14,644|