THE NEW PENSION SCHEME, ACT 766 – Q & A

1.                   Why the New Pensions Act, 2008?

·         To provide pension benefits to ensure retirement income security for workers.

·         To ensure that every worker receives retirement as and when due and

·         To establish a uniform set of rules and standards for the administration, payment of retirement and related benefits for workers.

2.                   What are the new contribution rates and how are they distributed between the Employer and Employee?

Worker              -           5.5% of basic salary

Employer                      -           13% workers’ basic salary

Total                             -           18.5%

·         Out of the 18.5%, employer remits SSNIT 13.5% within 14 days after the end of the month to the mandatory first-tier Basic Social Security Scheme – SSNIT.

·         Again out of the 13.5% with SSNIT, 2.5% is sent to the NHIA for the member’s health insurance.

·         The 5% is sent to the mandatory second tier occupational scheme which will be privately managed by Trustees approved and licensed by the Board of NPRA.

·         This means that the 1% over the current contributions is jointly contributed by the worker and the employer.

3.                   Who can become a member?

The 3 –tier scheme covers all workers in both the private and public sector.  It is optional for the self-employed.

Additional Groups

·         Cap 30

·         Teachers’ Pension ordinance

·         Superannuation of Ghana Universities Staff

·         Ghana Police

·         Immigration Service Persons

·         Prisons Service

·         National Fire Service

4.                   What are the new features of the scheme?   Or give the main differences between the old and the new pension scheme.

1.                   It is a 3-tier scheme.

2.                   The first two are mandatory for all workers.

3.                   The third-tier is voluntary, fully-funded and privately managed provident fund and personal pension scheme.

4.                   SSNIT pays only the monthly pension of the beneficiary and the fund managers who manage the second tier (5%) pays the lump sum.

5.                   It is for both the public and private sector workers.

6.                   Minimum contribution – 18.5% of the approved monthly minimum wage (13.5% - SSNIT 1^st Tier; 5% - 2^nd Tier).

7.                   Maximum Contribution – a maximum amount will be determined by SSNIT in consultation with the NPRA periodically.

8.                   Maximum contribution period – 180 months in aggregate or 15 years.

9.                   Entry age/Maximum Age – New minimum age is 15 years and the maximum age for a new entrant is 45 years.

10.               Age Exemption – those who will be 55 years and above before the commencement of Act 766 are exempted from this new scheme.  On the other hand, a person who is 55 years and above exempted from the Act may opt to join the new scheme.

11.               The new scheme includes almost all the various pensions systems in the country. 

5.                   What are the benefits under Act 766?

There are three benefits under the scheme:

·         Superannuation Pension

·         Invalidity Pension

·         Survivor’s Lump Sum

6.                   What are the qualifying conditions for the old age pension?

Old Age Pension

Full Pension

·         Must be at least 60 years

·         Must have made a minimum of 180 months (15 yrs) aggregate contributions.

Reduced Pension

·         Must be 55 years and above, but below 60

·         Must have made a minimum of 180 months (15 years) in aggregate contributions.

Basis for Calculation

·         Age

·         Average of best 36 months salary

·         Earned pension right – number of months you have contributed to the scheme, ranging from 50% - 80%.  Every year attract an additional percentage of 1.5%.

Lump Sum Payment

The  lump sum payment now falls under the second tier.

7.                   What are the qualifying conditions for the Invalidity Pension?

Invalidity Pension

·         Must have made a minimum contribution of 12 months within the last 36 months prior to being an invalid.

·         You must have been declared permanently invalid and incapable of any normal gainful employment by:

a)                   A qualified and recognized medical officer.

b)                   Certified by a Regional Medical Board with a SSNIT Doctor being a member.

8.                   What are the qualifying conditions for the Survivor’s Lumpsum Benefit.

Survivor’s Lump Sum

This is paid to dependants of members under the following:

·         When a member dies before retirement or

·         When a pensioner dies before age 75

Computation

·         Where a member dies having made at least twelve months contribution within the last 36 months prior to his death, a lump sum payment of the earned pension of the deceased members for a period of 15 years will be paid based on the present value discounted at the prevailing Treasury bill rate or 10% whichever is however will be paid to the members nominated dependants.

·         When the death of the member occurs before making the twelve months contribution within the last 36 months a lump sum equal to his total contributions and interest at the rate of 75% of government Treasury bill rate.

9.                   Who is exempted from the Act 766?

·         Officers and men of the Ghana Armed Forces

·         Categories of persons exempted by the 1992 Constitution. E.g. Electoral Commissioner, CHRAJ Commissioner, Chief Justice etc.

10.               What is the National Pension Regulatory Authority?

·         The National pensions Regulatory Authority was established by Act 766 to regulate and monitor the operations of the three –tier scheme to ensure effective Administration.

·         It has the capacity to sue and be sued and has perpetual succession.

·         It also issues guidelines for investment of Pension Funds and ensures compliance with Act 766..

·         Register Occupational, Provident Funds and Personal Pension Schemes.

·         Set up standards, rules and guidelines for the management of Pension Funds.

11.               What are the workers’ obligation?

·         Every worker who has an employer-employee relationship must be registered with the Scheme.

·         Every worker should have only one (1) social security number.

·         Use same number for your whole working life.

·         Number not transferable.

·         Change your dependants after every five (5) years.

·         A member shall take steps to update or correct any missing or inaccurate information in the statement of Account presented by SSNIT and support it with any relevant accurate document.

12.               Can the self-employed or any contributor fix any arbitrary salary for himself.

No. The Act stipulates that the maximum contribution to the Trust shall not exceed 13.5% of a maximum amount to be determined by the Trust periodically in consultation with the NPRA.

13.               What are the employer’s obligation under Act 766

·         Register all his employees under the Scheme.

·         Make regular contributions on behalf of the workers to SSNIT.

·         Deduct 5.5% of the workers salary and add 13% of worker’s basic salary.

·         Out of the 18.5% the employer is to remit 13.5% to the Trust within 14 days after the end of each month.

·         2.5% of the 13.5% paid by employer shall be transferred by the Trust to the National health Insurance Fund.

·         The employer shall accompany each payment with a list of the workers indicating their social security numbers and the amount each worker is contributing – called the contribution report.

·         Contribution report must be submitted whether contributions are remitted to the Trust or not by the end of the month of submission.

·         3% penalty per month shall be imposed on unpaid contribution.  Additional penalty of 3% per month on the contributions plus penalty may be imposed if after written demand, the employer fails to pay.

14.               Who is an employer?