400,000 workers migrated to old pension scheme
All pension contributors who turned 50 years and above as of January 2010, when the new pensions law came into force, have been reverted to the old pension scheme under PNDC Law 247.
Consequently, more than 400,000 members of the Social Security and National Insurance Trust (SSNIT) Pension Scheme, including active/inactive members and pensioners, have been exempted from being governed under the new National Pensions Act, Act 766; they have now been reverted to PNDCL 247 managed solely by SSNIT.
This is because of an amendment to the National Pensions Act, Act 766 which has widened the age category of contributors who were exempted from the new Act from 55 years to 50 years as of January 2010.
SSNIT has, therefore, assumed responsibility over the benefits of these contributors and will be expected to pay the affected contributors the 25 per cent lump sum plus their monthly pensions when they retire. Monthly pensions benefits are indexed annually and paid to the pensioner until he/she dies.
The latest development on pensions is expected to bring a major relief to contributors who had earlier agitated because of the drastic dilution of their lump sum component of their benefits under the new law.
In an interview with the GRAPHIC BUSINESS shortly after a special forum for editors in the media under the auspices of SSNIT at Aburi in the Eastern Region, the General Manager, Operations, SSNIT, Mr Theodore Ohene, explained, “The new arrangement is better for the contributors in that age cohort (50 years and above as of January 2010) because they will receive a better retirement package.”
According to him, it was observed that contributors aged 50 and above as of January 2010 could not accumulate enough contributions under the 2nd Tier Scheme to guarantee them a superior lump sum benefit by the time they retired at 60 years, hence the decision to review the Act and revert that cohort to PNDCL 247 to ensure a better benefit for them.
New arrangements
With the amendment to Act 766, three things are expected to happen to fully integrate those affected by the new age limit fully into the SSNIT scheme.
First, Mr Ohene said the five per cent contributions for all those affected by the new Act, who had their contributions paid into the Temporary Pension Fund Account (TPFA) lodged at the Bank of Ghana because they had still not selected a trustee under the second tier, would be retrieved by the National Pensions Regulatory Authority (NPRA) and returned to the Trust for their SSNIT accounts to be credited with the amount.
Secondly, he said, the five per cent contributions of those who had made contributions to the managers of their Second Tier Pension Scheme would be retrieved by the NPRA and paid to SSNIT to credit their account with the Trust.
Finally, he noted that those affected by the amendment who had taken their benefits under the Act 766 (and have now been placed under PNDCL 247) would have their benefits recomputed and any difference paid to them.
The New Pensions Act
The National Pensions Act has introduced a Three-Tier Pension Scheme comprising: first tier – a mandatory basic social security scheme managed by SSNIT; second tier – a mandatory fully-funded and privately-managed occupational scheme and; third tier – a voluntary fully-funded and privately-managed provident fund and personal pension scheme.
Workers react
Some workers at the various Ministries, Departments and Agencies (MDAs) interviewed about the latest development described the new move as a major relief.
The workers, aged between 50 and 54 as of January 2010, who pleaded anonymity, said they had been concerned about the new law because of the negative impact it was going to have on their pensions when they retired.
“To me, I think the SSNIT is more secure and left to me, the whole law should be changed again to allow SSNIT to take over,” one said.
Another regretted that all along he had contributed on his basic salary without the allowances, which meant that he would receive lower pension benefits in future.
To make amends, he said he had written to his employers to make the deductions on the entire amount including his allowances to enable him enjoy better pension benefits in the near future.
Low pensions
Answering a question as to why some pensioners received low pensions on retirement, Mr Leslie Arde-Acquah, General Manager, Benefits Division, SSNIT, explained that there were workers whose employers failed to declare to the Trust the right amounts they received as salary.
Contributions were, therefore, paid on part of the salary excluding very huge allowances in some cases.
He noted that the pensions benefits were calculated on the declaration made and cautioned employees who connived with their employers to contribute lower amounts to desist from the practice.