ASM COMMUNICATION - PRINCE K. OWUSU

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NATIONAL PENSION
REFORM & BENEFITS
PRESENTED
BY:
PRINCE K.
OWUSU
INVESTMENTS
&
OPERATIONS

PRESENTATION OUTLINE
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 PENSION REFORM IN GHANA,
 THE NATIONAL PENSIONS BILL, 2008,
 GOVERNANCE,
 CHALLENGES,
 SOCIAL ECONOMIC IMPACT OF THE REFORM.
PRINCE K. OWUSU: INVESTMENTS & OPERATIONS

PENSION REFORM IN GHANA
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Over the years, concerns have been raised and
agitations made by public servants over
inadequacies of the level of pensions to sustain a
respectable life for retired public servants. Of
particular concern to most workers’ groups has been
the low pensions received by workers under the
Social Security and National Insurance Trust
(SSNIT) Pension Scheme compared to those still
under Chapter 30 of the 1950 British Colonial
Ordinances (Pension Ordinance No. 42), popularly
known as CAP 30.

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In addition, pension schemes that have been operated
in the country so far have, beside their limitations,
also failed to consider the plight of workers in the
informal sector, who constitute the bulk (about 85%)
of the working population in Ghana. The concern rose
to a peak in agitation and protests by workers’
organizations for the restoration of public service
pensions to the level of the provisions still available to
some public officers under CAP 30, in place of the
SSNIT system that had been introduced in 1972 as the
mandatory and universal pension scheme for all
employees.

PRESIDENTIAL COMMISSION ON PENSIONS
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In recognition of the need for reforms to ensure a
universal pension scheme for all employees in the
country, and to further address concerns of
Ghanaian workers, the Government in July 2004
initiated a major reform of the Pension System in
Ghana. The process started with the establishment
of a Presidential Commission on Pensions under the
chairmanship of Mr. T. A. Bediako.

COMMISION
COMISSISON TASK
Examine existing pension
arrangements
Examine existing pension
arrangements
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Make appropriate
recommendations for a
sustainable pension scheme(s)
Make appropriate
recommendations for a
sustainable pension scheme(s)

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The Commission submitted its Final Report in
March 2006. The Government accepted almost all
the recommendations of the Commission and issued
a White Paper (W.P. No. 1/2006) in July, 2006.

COMMISION’S RECOMMENDATION
RECOMENDATION
Main
Recommendation
Main
Recommendation
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Other
Recommendation
Other
Recommendation
· Restructuring of SSNIT,
· Review of the SSNIT Law,
· Establishment of a National
Pensions Regulatory Authority
· Pension Coverage for the Informal
Sector
· Creation of a new
Contributory three-tier pension system

PENSION REFORM IMPLEMENTATION
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In October, 2006, the Government, appointed
an 8 member Pension Reform Implementation
Committee and a Consultant to implement the
recommendations of the Presidential
Commission on Pensions approved by
Government in its White Paper No. 1/2006 of
July 2006.

PENSION REFORM IMPLEMENTATION
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The Pension Reform Implementation
Committee commenced work In November,
2006 and as part of its mandate submitted
proposals for National Pension Reform Bill to
Government in August, 2007. Cabinet
approved the Bill and presented it to
Parliament for passage into law.

GOVERNANCE
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Pension Regulator
The Authority approves, regulates and
mon and trustees, Pension fund
managers.

NATIONAL PENSIONS REGULATORY AUTHORITY
(NPRA)
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Sensitise the public on matters related to the
various pension schemes;
Receive and investigate complaints of impropriety
in respect of the management of pension schemes;
Receive and investigate grievances from
pensioners and provide for redress
Advise government on the general welfare of
Pensioners.
Advice government on the overall policy on
Pension matters in the country.

COMPANY APPOINTS
TRUSTEE
CUSTODIAN FUND MANAGER
NEW PENSION SYSTEM
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TRUSTEE
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A Trustee shall, in addition to other duties imposed
by a Trust Deed, perform the following functions:
1 Secure Scheme registration.
2 Appoint Pension Fund Managers, Pension Fund
Custodians and other service providers and ensure
their compliance with regulatory requirements or
guidelines.
3 Maintain investment policy statements and
internal control procedures prescribed by the
Authority.

TRUSTEE
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4 Ensure that the investment of funds of the scheme is
diversified to minimize investment risk.
5 Act as a provident trustee in financing relationship with
its members.
6 Discharge the duties of a Trustee.
7 Process transfer and payment requests as contained in the
trust.
8 Keep proper accounting records and a members’ register.
9 Prepare and lodge annual audited financial statements,
scheme and investment reports with the Authority.

PENSION SCHEMES
SCHEME
MANDATORYMANDATORY VOLUNTARYVOLUNTARY
1ST
Tier National
Social Security
Scheme
2nd
Tier
Occupational
Pension Scheme
13.5% of Salary 5% of Salary
Pension
Lump Sun,
Annuity, Pensions,
Life Cover, End of
Service Benefit
3nd
Tier
Occupational
Pension Scheme
Max Of 16.5%
Allowable for tax
exemption
Lump Sun, Annuity,
Pensions, Life Cover,
End of Service
Benefit
Description
Contribution
Benefit
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REMITTANCE
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Out of the total contribution of 18.5%
13.5% will be remitted to SSNIT (restructured) for
the mandatory 1st
tier: to provide monthly pensions
and related benefits (2.5% NHIS Levy; 11%for
pensions)
5% will be remitted to the mandatory 2nd tier
privately managed for Lump sum benefits.
The Minimum Contribution for the mandatory
schemes will be based on daily minimum wage.

PENSION SCHEMES Con’t.
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First tier mandatory basic national social security
scheme which incorporate an improved system of
SSNIT benefits, mandatory for all employees in both
the private and public sectors; ( no lump sum
payment, only monthly pensions and related benefits
such as survivors benefit)
The scheme applies to every employer and to each
employee. The minimum age at entry is fifteen (15)
years and the maximum age is 45. Compulsory
retirement age is sixty (60) years while voluntary
retirement age is fifty five (55) years.
PRINCE K. OWUSU: INVESTMENT & OPERATIONS

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Second tier occupational (or work-based) pension
scheme, mandatory for all employees but privately
managed, and designed primarily to give
contributors higher lump sum benefits than
presently available under the SSNIT or Cap 30
pension schemes;

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Contributions The remaining 5% of the mandatory18.5%
will be paid to this scheme.
Benefits and Qualifying Condition : Lump sum benefit will
be paid:
On attainment of compulsory retirement age of 60.
On attainment of age 50 and the member is not employed
or self employed.
Retirement on the account of ill-health.
On the death of a member of the scheme, to the member’s
nominated beneficiary(ries).

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Third tier voluntary provident fund and personal
pension schemes, supported by tax benefit incentives
to provide additional funds for worker who want to
make voluntary contributions to enhance their
pension benefits.
It is pertinent to note that provision has been made
in the 3rd Tier voluntary Personal Pension Scheme
to cater for the peculiar needs of workers in the
informal sector of the economy which covers about
80% to 85% of the working population.

PENSION SCHEMES Con’t
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Part Three of National Pension Act 2008, defines
Voluntary or Occupational Scheme as a pension
scheme that is work-based, established under a
trust which provides benefits based on a defined
contribution formula in the form of a lump sum.
(a) payable on termination of service, death or
retirement, or in respect of persons covered under
section 58 of this Act; and
(b) payable to or in respect of other persons
specified under the second tier of the Scheme as
provided for under section 1 of this Act.

PENSION SCHEMES Con’t
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Other clauses:
Portability of accrued benefits: 100. A member
of an employer sponsored scheme who ceases to be an
employee shall, elect to have the member’s accrued
benefits transferred to another scheme in accordance
with the regulations of the scheme.
Protection of accrued benefits: 102. The accrued
benefits of a member in an occupational pension scheme
shall not be attached in execution of a judgment debt or
be used as a charge, pledge, lien, or be transferred,
assigned or alienated by or on behalf of the member.

CHALLENGES
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The 2nd and 3rd tier privately-managed schemes are
Defined Contribution (DC) Schemes and members
accrued benefits depends on their contributions and
returns on investments. DC schemes succeed when
investment returns are adequate.
- How funds are invested
- Conditions under which investment policies are
determined, and
- Supervisory and regulatory guidelines that are put in
place to safeguard these funds.

BENEFITS
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15 Years to qualify for SSNIT benefits instead of 20
years
Using future lump sum pension benefits to secure
mortgages.
Workers will have control over their pension
benefits under the 2nd
and 3rd
Tier which are to be
privately managed.
Special pension for the informal sector which has
been neglected all this time.
 Cost effective: Privately managed schemes tend to
increase

SAFEGUARDS:
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To ensure that members’ interests are adequately
protected, the Pension Bill has in-built safeguards
including:
To ensure that members’ interests are adequately protected,
the Pension Bill has in-built safeguards including:
- Stringent approval and registration criteria by the
Pensions Regulatory Authority.
- Separation of functions of Trustees, Fund managers and
Custodians
- On- going monitoring

SAFEGUARDS Cont’.
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Pension assets held by a Custodian shall not be used to
meet the claim of any Custodian’s creditors in event of
liquidation of the Custodian
 Pension assets held by a Custodian shall not be seized or
subject to execution of judgment debt or stopped from
transfer to another Custodian
Sale of pension assets, grant of loan or use as collateral is
prohibited.
Maximum limits on fees for service providers (Trustees,
Fund Managers and Custodians).

SAFEGUARD Cont’.
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To provide scheme members with additional layers of
protection, trustees licenced by the Authority are required
to take out adequate insurance to indemnify scheme
members against any losses of scheme assets caused by
malfeasance or misconduct of the trustees or their service
providers.

VOLUNTARY
 There are no restrictions on the
investment of funds as well as on sale,
purchase or disposal of privately-
managed pension fund assets.
 There are restrictions on the investment of
funds as well as restrictions on sale, purchase
or disposal of privately- managed pension
fund assets.
No. ASSET CLASS MAXIMUM INVESTEMENT AS
% OF FUNDS
1. GOG SECURITIES 75%
2. CORPORATE BONDS &
DEBTS
30%
3. MONEY MARKET 35%
4. SHARES 10%
5. OPEN & CLOSE ENDED
FUNDS
5%
No
.
ASSET CLASS MAXIMUM INVESTEMENT
AS % OF FUNDS
1. GOG SECURITIES Based on fund managers advice & Constitution
2. CORPORATE BONDS &
DEBTS
Based on fund managers advice & Constitution
3. MONEY MARKET Based on fund managers advice & Constitution
4. SHARES Based on fund managers advice & Constitution
5. OPEN & CLOSE ENDED
FUNDS
Based on fund managers advice & Constitution
REGISTERED VS. UNREGISTERED
SCHEMES
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unregistered schemeregistered scheme

CASE STUDY: REGISTERED VRS. UNREGISTERED
YEAR Registered Unregistered
Contribution Returns Total Contribtion Returns Total
1 247,321.63 39,532.30 286,853.92 248,336.28 47,101.41 295,437.69
2 396,663.95 85,111.19 481,775.14 412,898.99 89,064.90 501,963.88
3 586,712.13 112,467.32 699,179.45 619,425.18 141,729.08 761,154.26
4 798,681.34 158,019.50 956,700.84 878,615.56 207,822.63 1,086,438.18
5 1,049,764.69 211,977.31 1,261,742.00 1,203,899.48 290,770.03 1,494,669.51
6 1,347,179.82 275,891.82 1,623,071.65 1,612,130.81 394,869.01 2,006,999.82
7 1,699,476.23 351,600.32 2,051,076.55 2,124,461.12 525,513.24 2,649,974.36
8 2,116,781.01 441,279.12 2,558,060.14 2,767,435.66 689,471.75 3,456,907.41
9 2,611,090.01 547,506.12 3,158,596.13 3,574,368.70 895,239.68 4,469,608.38
10 3,196,612.60 673,334.93 3,869,947.53 4,587,069.68 1,153,478.43 5,740,548.11
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SOCIAL ECONOMIC IMPACT
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Improve living standards of the elderly
Secure financial autonomy and
independence of retirees;
Increases National Savings and long term
funds
Promote growth and development of the
capital, mortgage and Insurance markets.

SOCIAL ECONOMIC IMPACT
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As professional and Management Staff, you
are expected to provide the necessary
leadership and educate workers on the on-
going Pensions reforms.

End Of
Presentation
THANK
YOUQ & A

Email: p_k_owusu@yahoo.com
Contact Information
PRINCE KWASI OWUSU
INVESTMENTS & OPERATIONS
VERIT INVESTMENTS LTD
2ND
FLOOR LAINE BUILDING,
ADAMA ROAD, ADABRAKA-ACCRA
+233 (0) 249-377-761
CONTACTS

ASM COMMUNICATION - PRINCE K. OWUSU

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