Pension Management: Business as Usual 11 Years after Act 766

In the early 2000s agitations were rife among workers in Ghana concerning pensions in this country. It was a critical period where we had people who were enrolled on the Cap 30 and SSNIT pension schemes were taking a bow from active service.

What it meant was that at the time such people started their service to the nation, there was a transition where theCap 30 pension scheme was being phased out for most public sector employees and the new contributory pension scheme was taking over fully under NRCD 127(1972) later transformed into a Social Security and National Insurance Trust by PNDC Law 247.

The result was that we had workers who started life within the same period, some within the same department some of who still got onto the Cap 30 scheme while the rest missed it by just days or weeks and some by choice. The social security legislation then actually made it possible for some category of CAP 30 employees to elect to join the Social Security scheme.

The result was that at a time they were retiring, these people could compare the two systems and such a comparison showed that those who were lucky to get onto the Cap 30 scheme had retirement packages far in excess of what their colleagues who were enrolled on SSNIT got.

It means that two people employed in the same organization perhaps a month or two apart, one on Cap 30 and the other on SSNIT will have the reasonable basis to expect that their retirement packages will be relatively the same.  This was unfortunately not the case as those on cap 30 got several folds the benefits that the SSNIT pensioner at the time got.

It will be recalled that there was a wave of demonstrations calling on the then President Kufuor to bring back the cap 30 pension scheme which many realized was far beneficial than the SSNIT pension scheme at the time.

The Ghana National Association of Teachers at the time being one of the biggest organization of workers in the country spearheaded these agitations and it culminated in President Kufuor setting up a Presidential Commission on Pensions to look into the matter and advise government. The commission led by the late Dr. T.A. Bediako, a former General Secretary of Ghana National

Association of Teachers (GNAT), did a thorough job and proposed the Three Tier Pension Scheme which was promulgated in to law in 2008. Unfortunately the NPP government then couldn’t operationalize the law before they exited office on January 6, 2009.

The new government of Professor Mills demanded time to study the scheme and set a date of January 2010 for implantation to start. So on January 1st 2010, one of the requirements of the law took off which is that, the contributions of employers and employees to employee’s pension increased from 12.5% and 5% respectively to 13% and 5.5% respectively.

So in all the contributions towards pension from employer and employee together became 18.5% where 11% goes to SSNIT to manage for the payment of monthly pensions, 5% going into what is called the Occupational Pension Scheme and 2.5% goes into servicing the National Health Insurance Scheme as a supplement to the National Health Insurance Levy (tax).

It is on this basis that is why formal workers (SSNIT contributors) are not required to pay for renewal of their health insurance cards since they are already contributing 2.5% of their pension contributions to the scheme but the reality as we see it is different. So the 11% goes to SSNIT and 5% goes to the Occupational Pension Schemes which were intended to be privately managed towards the payment of gratuity (lump sum) to workers upon retirement.

So the fundamental difference between the old SSNIT pension arrangement and the current three tier pension is the fact that it took away the responsibility of payment of gratuity from SSNIT to the Second Tier privately managed scheme. So SSNIT retained the First Tier for the payment of monthly pensions only.

In summary, the First Tier is mandatory and managed by SSNIT, the Second Tier is also mandatory and managed by various occupational pension schemes and the voluntary Third Tier privately managed provident fund scheme registered with the National Pension’s Regulatory Authority (NPRA).

One fundamental reason for the pension reform was the fact that pension funds channeled to SSNIT as a quasi-monopoly were vulnerable to governmental influence. People at the time felt that SSNIT was only semi-autonomous and were not subject to any regulatory authority.

The ring-fencing of the second tier outside SSNIT’s fold was to enhance the efficiency of investment since private management of such investments comparatively were better than any scheme run by public sector.

Pension fund are always at the mercy of governments’ whim and caprices and its one reason why the diversification was made to ensure that government’s influence will be avoided in the administration of the Second Tier.Unfortunately, government has found a way to reassert its influence in the private Occupational Pension Schemes set up by employees within agencies where government is the employer.

A case in point is the Ghana Education Service Occupational Pension scheme (GESOPS) which started operations on 19th April 2016. Section 1(b) of ACT 766 provides for a mandatory fully funded and privately managed occupational pension scheme, which means that funds remitted to the Tier Two must be managed privately.

Government in an attempt to exert influence here saw a court action which culminated in an out of court settlement where there was a compromise between Teachers and Educational workers represented by their unions on one side and the government on the other. The issues centered on who appoints the chairman of the board of trustees and who has the power to appoint the various service providers to the scheme.

At the time, the government acting as an employer nominated five members including the chairman of the board of trustees, there was one independent trustee while the unions representing employees in the GES nominated nine members.

In engaging the service providers, the government nominated Universal Merchant Bank, Firstbanc Financial Services limited and Pension’s Alliance Trust as custodians, fund managers and administrators respectively. The unions nominated Frontline Financial Services as fund managers and also appointed Petra Trust as corporate trustees.

The involvement of so many service providers for just one scheme already begs that question as to whether this scheme was really planned to serve the interest of pensioners or set up to provide stable revenue and profit for these service providers.

In fact there are private pension schemes currently giving very good returns to voluntary contributors without all the excess administrative baggage that will go with cost. It can be concluded that, GES Occupational Pension Scheme is just another means of providing government with another source of free money which will be at their beck and call since they control virtually all the service providers.

What should interest teachers and other members of the GES Occupational Pension Scheme is that another litigation is looming which will have huge cost implications to the scheme.  The contract of the previous government’s nominated service providers ended in November 2018 and the current government swiftly nominated an entirely new set of service providers of their choice to replace the previous ones.

The new providers are Prudential Bank, Glico Pensions and Data Bank as Custodian, Fund Managers and Administrators respectively. Meanwhile, the former service providers are alleging that even though they had a two year contract with the board of Trustees of the GESOPS, they were actually contracted by the previous government for seven years to provide service to the board as such government is in breach for not reappointing them to provide service to the scheme.

The sticking point is that the transfer of assets and other data from the previous providers to the newly appointed providers is in limbo a situation which has the propensity to affect pensioners under the scheme as the full implementation of the scheme is billed to take off on the 1stof January 2020.  In fact, those going on voluntary retirement today are already being affected.

A careful observation of the companies involved in this round-robin clearly shows that the service providers are all linked actually or constructively to personalities who served in the previous government and those that are currently occupying high positions in government today. This betrays the actual objective of the new pensions regime that workers agitated and hoped for.

So much time, effort and money have been put into pension reforms but the long and sharp talons of government is gradually bringing back to square one all the good things that were envisaged under Act 766. The objective of making at least the second tier pension schemes private and insulated from governmental control has all but been defeated.

Government is even boldly stating that it intends to use pension funds to ‘rescue’ some perishing private banks under the Ghana Amalgamated Trust. Unfortunately, no one seem to be paying attention. The unions have spoken assuring workers in a release on 16th January that funds of the established four public sector occupational pensions schemes will not be subjected to the transactions to be undertaken by GAT. It is a welcome assurance but they need to ensure that more attention is focused on how the funds are being managed to ensure the best possible returns to prospective pensioners.

It’s been eleven years since the National Pensions Law (Act 766) was passed. By virtue of the amendments by ACT 883 (2014) the effective implementation date has been rescheduled for January 1st 2020 which means that those who will go on pension on or after that date will take their lump sum or gratuity  from the Occupational Pension Scheme(2nd Tier) and just monthly pension from SSNIT(1st Tier).

Those who toiled to bring about the new pension regime did not envisage a business as usual attitude that we are experiencing from the implanting bodies today. The next ten years should see a lot of progress where workers will not be bitter but better upon their retirement.

By Napoleon-Bonaparte Afenyo

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