The Social Security and National Insurance Trust (SSNIT) has noted that implementation of the new Pensions law, which has reduced the percentage of workers social security contribution to the SSNIT pension scheme, could stifle the scheme’s funds as payment of pension benefits exceeds contributions.
SSNIT, which has acknowledged the relevance of the new pension law, said the plunge in percentage of contributions amidst a rise in number of contributors has come at a time that the payment of pension benefit has surged.
The General Manager of SSNIT, Peter Hayibor, told the B&FT on the sidelines of a symposium organised by the Retired SSNIT Staff Association (RESSA) in Accra that funds available to SSNIT (for investment) have dropped since the percentage of workers’ contribution to SNNIT has been cut from 17.5% to 11% with the coming into force of the new Pensions Act.
“The funds that are available to SSNIT have reduced; the benefits paid to pensioners do not depend on how much they put in. Therefore, if you have investment income reduced then it will definitely have an impact on returns. The fact is that this is also happening at a time the scheme is growing and the number of pensioners is increasing, so the cost of benefit is growing,” he said.
SSNIT, which is the biggest investor in the country with assets across all sectors of the economy, collected an amount of GH¢934million as contributions in 2012, which represented a 13% rise over the amount collected in 2011.
Meanwhile, the total value of benefits paid in 2012 was GH¢443.15million, which represents an increase of 24.78% over the same period in 2011 in which GH¢355.15million were paid.
The latest data shows that as at the end of 2012, the total investment portfolio of SSNIT stood at GH¢4.07billion, an increase of 19.0% over the GH¢3.42billion of 2011 with real return on investment at 12%.
According to SSNIT, the pension population as at August 2014 increased to 130,000 as against 107,312 in 2010, while total membership has also increased from 900,322 in 2010 to about 1,161,973 as last month.
President of the Retired SSNIT Staff Association Fred Bukari asserted that the new law has placed SSNIT in a tight situation due to the increasing number of people on the scheme.
“Under the new law contributions have dropped to 11 percent, which affects those of us who are retired. This is because the number of pensioners keeps increasing every year, and if the trend continues a time will come when SSNIT might not have enough funds to pay pensioners and undertake its investments,” he said.
The symposium, which was on the topic “Current state of pension reforms in Ghana”, sought to create awareness for the new law.
Mr. Bukari said RESSA finds it important as retired staff of SSNIT to advise SSNIT on concerns of the new law, hence the symposium.
The new Pensions Act, which took effect in January 2010, has contributory three-tier pension scheme comprising two mandatory schemes and a voluntary scheme – as well as a first-tier basic national social security scheme.
The second-tier occupational pension scheme wherein the trustee companies will operate is mandatory for all employees, but it is privately managed and designed primarily to give contributors higher lump-sum benefits than is presently available under the SSNIT pension scheme.
The third-tier voluntary provident fund and personal pension scheme is supported by tax benefit incentives to provide additional funds for workers who want to make voluntary contributions to enhance their pension benefits, and also for workers in the informal sector who are not catered for by the first two mandatory schemes.
It is envisaged that the new three-tier pension scheme will enhance pension benefits and increase the retirement income security of workers in both the formal and informal sectors.
Mr. Hayibor said implementation of the three-tier pension scheme is necessary as it is imperative that workers retire on a number of pillars, saying: “The aim of the new scheme is basically to ensure that by the time a worker is retiring, she/he retires on a number of income pillars. It is to ensure adequacy of security by making pension benefits better than they were under the old law”.