Social Security: Is it a pain or gain

Social security is “A body of public measure that society may take to protect its members against economic and social distress which may otherwise be caused by substantial loss of income as a result of old age, invalidity, sickness, unemployment, employment injury, death of breadwinner, maternity, health (medical costs) and to help ease the financial burden on a family in the maintenance of children”.  

Major characteristics

Major characteristics of a Social Insurance Scheme are: It is established by law.

It is financed through employer/employee contributions. Government may also contribute; It pays periodic (monthly) benefits; Benefits are related to insured earnings; There are no needs tests; Benefits are earned as a right by virtue of contributions.

Social security in Ghana

Social Security in Ghana started in 1965 under Social Security Act 279 of 1965.

The Social Security and National Insurance Trust and also referred to as the Trust, was established in January 1972 under NRCD 127 to administer the National Social Security Scheme which had been in existence earlier on under the joint administration of the then Department of Pensions and the State Insurance Corporation  as a Provident Fund Scheme.

SSNIT is a statutory public Trust charged with the administration of Ghana’s National Pension Scheme.  The Trust is currently the biggest non-bank financial institution in the country.

Its primary responsibility is to replace part of lost income due to Old Age or Invalidity.  It also pays Survivors’ benefit to dependents of deceased members.

SSNIT’s strides last year

The total investment portfolio of the Social Security and National Insurance Trust (SSNIT) increased from GhC5.2 billion in 2013 to GhC6.6 billion at the close of 2014.

This represents a positive variance of 27.9 per cent. The amount for the year under review is made of GhC2.35 billion in equities; GhC3.61 billion in fixed income and GhC640.51 million in alternative investments.

The real return on investments of the Trust for 2013 was 16.90 per cent, which indicates that SSNIT has consistently exceeded actuarial valuation targets.

For instance according to the 2011 external actuarial valuation of the scheme, at 3.25 per cent Real Return on Investment (RROI), the Fund could be sustained till the year 2032 and at 1.25 per cent till the year 2030. 

Contrary to allegations which question the sustainability of the fund, the RROI clearly signals the viability of the Trust in the coming decades.

Exposure on the GSE

SSNIT is a major player on the local bourse. It is said to be the biggest financial institution in the country. In terms of investments in listed companies, SSNIT has heavily invested on the Ghana Stock Exchange (GSE). For instance, the Trust has investments in 22 out of the 36 listed companies on the local bourse. 

For the financial sector investments alone, the Trust has investments in 18 companies. 

The key ones among them include Cal Bank where the Trust has 33.18 per cent shares; GCB bank, 29.81 per cent; HFC bank 26.14 per cent; Societe general Ghana, 22.14 per cent; Ecobank Ghana Limited, 16.19 per cent; Ghana International Bank, 15.00 per cent; and Standard Chartered Bank where it owns 14.34 per cent.

Others are SIC Company Limited, 11.80 per cent; Enterprise Group, 6.13 per cent and CDH Holdings 1.30 per cent.

Other investments

SSNIT also assists with short term securities; that is, it provides funds to several financial institutions in the country in the form of; fixed deposits; call accounts; syndications and Treasury bill placements.

The Trust has about 54.7 per cent of its portfolio invested in government/corporate bonds and loan facilities extended to companies in various sectors.

It is exiting to note that, contrary to allegations that the investments of the Trust were not performing, SSNIT has more than 99 per cent of its investments performing, leaving less than one per cent non-performing.

Supporting SSNITs call

Consistently, SSNIT has drummed home the need for employees to ensure that their employers pay the exact deductions from their salaries to the Trust.

According to SSNIT, the pensions of contributors can only be calculated on the amount received by the trust on their behalf and advised that it will be in their interest to monitor  what is deducted and paid by their employees.

This call is crucial because workers continue to agitate for higher pensions to be paid them in the period of retirement but they seem not to be keen on what is contributed by them and for them by their employers.

It has been evident that many workers deliberately connive with their employers to reduce the amount of money on which the SSNIT contribution is calculated.

Others are also known to ring-fence their huge allowances and only allow for the deductions to be made on their basic minus the allowances which often times are way bigger.

Unfortunately, all these do not work in favour of the employees when they are on pension and then the agitations start. There is no doubt that when salaries reduce because of the deductions, employees feel the pain.

But it must be noted that, once they become very keen on monitoring what is be paid on their behalf and updating and reconciling the records at all times, we will be in a better position to track what is theirs and the grumbling will cease in the future.

There are many who enjoy good pensions and that is because, they took interest in the process. 

Other employees can also do same and that will make the pension scheme run by SSNIT a gain instead of pain.

While commending SSNIT for its effort, it is also imperative for the Trust to ensure that its administrative costs are reduced and all the inefficiencies reduced for the benefit of the contributors.