Pension Schemes

NPRA wants urgent unification of pension schemes

The National Pensions Regulatory Authority (NPRA) has urged government to, as matter of urgency, rope all individual pension schemes in the public sector under the three-tier pension scheme.

The CEO of the pensions regulator, Hayford Attah Krufi, told the B&FT that although the National Pension Act (Act 766), passed in 2008, stipulates that all parallel pension schemes be unified and brought under the three-tier system, that has not been done.

Before the passage of the Pensions Act, some public sector institutions had their own occupational pension schemes, which are non-contributory and therefore put a drain on government finances.

The CAP 30 pension scheme, for example, is funded by direct budgetary allocations from the consolidated fund, although public servants who qualify under it contribute 5% of their monthly salary, while the government contributes 12.5% of their respective salaries to SSNIT.

In a strong appeal to cabinet, Mr. Krufi wants a bill presented before parliament to compel all public sector pension schemes to come under the three-tier contributory system.

He said one of the key recommendations of the Pensions Reform Committee, and which is captured under section 213 of the National Pensions Act (Act 766) as amended, is that upon coming into force of the Act, all existing parallel pension schemes, such as the colonial Cap 30 and the university superannuation schemes, would be unified under the three-tier scheme, except that of the Armed Forces.

“The National Pensions Regulatory Authority was mandated under Act 766 to unify all pensions within five years from the date the assent on 4th December 2008. This means that the unification should have been complete in 2014,” he said.

The Cap 30 pension scheme is a non-contributory pension scheme instituted in 1950 under the Pensions Ordinance, No 42 of Chapter 30 for civil servants in the service before 1972.

“The Cap 30 is not actuarially valued and therefore payments are not budgeted for. But since it is a contingent liability on the government, its continued payment takes away the fiscal space that the government so badly needs,” he stated.

He urged the authority’s oversight ministries – Ministry of Employment and Labour Relations and the Ministry of Finance – to speak out on the matter in the corridors of power and get things done according to the law.

“As advisors to government on pension issues, under the Act, we are obliged to draw government’s attention to this pension time bomb that must be defused as soon as practicable,” he added.

Three-tier scheme

The First Tier is the Basic National Social Security Scheme for all workers in Ghana. It is a defined benefit scheme and mandatory for workers to have 13.5% contributions made on their behalf. The contribution is managed by SSNIT.

The Second Tier is a defined contributory Occupational Pension Scheme mandatory for workers, with 5% contribution made on their behalf, and is managed privately by approved Trustees.

The Third Tier, which includes all Provident Funds and all other Pension Funds outside Tiers I and II, is a voluntary scheme.

Source: Thebftonline