Africa-Press – Ghana. Pension is a fund where money is added during an employee’s employment years. Whilst in active work, both the employer and employees contribute towards the pension scheme in Ghana and this is to enable a contributor receive a monthly allowance and lumpsum pension or a lumpsum only upon retirement depending on the number of months a member contributes to the scheme.
Per the National Pensions Act, 2008 (Act 766) a member must contribute for a period of 15 years or 180 months to enjoy a full pension unlike under the old PNDCL 247 which was 240 months or 20 years
Until recently, SNNIT was the sole manager of pensions in Ghana. SSNIT was responsible for paying workers monthly allowance and lump sum at retirement. With the coming into effect of Act 766 in 2008, the National Pensions Regulatory Authority has the mandate to regulate all pension institutions in Ghana including SSNIT.
On 1st January 2010 the New 3- Tier Scheme was birthed and backed by the National Pensions Act 2008, (Act 766). Per the Act, the employer is mandated to contributee 13% and the employer contributing 5.5% from his or her basic salary making a total of 18.5%. Out of the 18.5% only 11% stays with SSNIT, 2.5% is paid automatically to the NHIS, and the remaining 5% is paid to the private Corporate Trustee licensed by the NPRA
The Tier 1 is a mandatory basic national social security scheme and it’s publicly managed by Social Security and National Insurance Trust (SSNIT); Tier 2 is a mandatory fully funded and privately managed occupational pension scheme and Tier 3 pension is a voluntary fully funded and privately managed provident fund and personal pension scheme.
This means workers in the informal sector can now enjoy a pension too. The Tier 2 and 3 are managed by a private Corporate Trustees. Tier – 2 is a work-based scheme so employers and employees have control of it. Because they can choose which Trustee can manage their Tier 2 and 3 schemes. The Tier 1 and 2 are mandatory schemes and the Tier 3 is a voluntary scheme.
Those in the Formal sector can also contribute to a provident fund scheme up to 16.5% of their basic salary to enjoy tax exemptions. But one can contribute more than the 16.6 %. But contributions beyond 16.5 under the Tier 3 for formal sector workers will not enjoy the tax exemptions. In order to also enjoy tax exemptions a member must contribute for a period of 10 years after which he/she can make a withdrawal.
At a two-day workshop organized by the Ministry of Finance for media practitioners in Northern Ghana at the UDS Guest House, Tamale, Madam Stella Akua Quartey from the National Pensions Regulatory Authority insisted workers have the right to know the Corporate Trustee that manages their mandatory Tier 2 pensions scheme. They also deserve to know whether their voluntary Tier 3 Corporate Trustee of their provident funds are registered in the Tier 3 scheme.
According to her, knowing the managers of your Tier 2 pensions scheme will enable you know the Trustees that is to pay you, your lump sum on retirement.
She therefore called on all workers in Ghana to ask their employers which Trustee manages their pension contributions
Under the new scheme the Tier 1 pays a member a monthly contribution and the Tier 2 pays a Lumpsum but members who were in the PNDCL 247 before 2010 upon retirement will receive a monthly pensions and a past credit from SSNIT since they were contributing 17.5% but their payment now will be on 11%.
According to Madam Quartey, those in the informal sector (e.g., tomato sellers, taxi drivers etc) can contribute individually or as a group. Savings account and a retirement account is opened for them. They can withdraw from the savings account because of the nature of the business they do.
To enjoy tax exemptions, they are advised to contribute to the scheme for a period of 5 years before they start withdrawing from the savings scheme
Participants at the workshop were also entreated to educate the public or employees to report any employer who fails/refuses to pay the pension contributions of their employees to SSNIT, the private corporate trustees or to NPRA. Non compliance with Act 766 will face the wrath of the law. NPRA has prosecutorial powers to prosecute defaulting employers.
Employees can also call the NPRA toll free line 0800766000 (MTN only or 0302-968692/3 or any of their social media handles or [email protected] for the necessary assistance or visit their website for the List of Corporate Trustees
Planning for retirement is something everyone needs to consider at the youthful age. Contributing towards a pensions scheme is therefore a necessary evil. The minimum age at which a person may join the Social Security Scheme is 15years and a maximum age is 45 years.
A member can go on invalidity pension on health grounds (person fall sick without reaching the age of retirement) or compulsory retirement at 60 or reduced pension at 55, however when one is unemployed at 50 years, he or she can access his or her Tier 2. One can also voluntarily retire at the age of 55, but will have to go through the Labour Department for the necessary unemployment documents.
To ensure retirement income security let us all embrace the 3-Tier pension scheme.
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