The National Pensions Regulatory Authority (NPRA) has said that it is worried about how huge sums of workersï¿½ pension funds lodged with the Bank of Ghana can be better invested to yield the best returns to contributors.
The situation has risen due to the inability of the pension regulator, the NPRA, to licence three key stakeholders the pension fund managers, pension custodians and pension trustees to manage the funds.
A board-member of the NPRA, Dr. Yaw Baah who is also the Deputy Secretary-General of the Ghana Trade Union Congress, told the B&FT during an interview in Accra that the Central Bank currently invests the pension funds in Treasury bills at the prevailing T-bill rates.
He said though pension funds are not lying idle at the Bank of Ghana, there are other investment instruments which could yield high returns if the three key stakeholders in the pension scheme are licenced.
ï¿½The pension funds are invested in Treasury bills and we donï¿½t even allow more than two days to pass before investment takes place. So, as SSNIT lodges it into the BoG account, it goes into investment immediately so that workers do not lose money. ï¿½The problem arises when the employer delays in paying the workers contribution to SSNIT. When it happens like that, the employee loses.
ï¿½So I would not advise workers not to worry. I would advise them not to worry too much, but they will need to worry about their future because we can plan towards it to get the best out of it.
ï¿½Our worry now is about how to invest this money, so that everybody will be covered and get the best out of it. ï¿½And that worry is because the economy itself must be in a better shape with places to invest and get the best. If we rely only on Treasury bills, as soon as the T-bill rate drops, the contributorsï¿½ lose,ï¿½ he said.
The situation is causing uneasiness among employers, employees, trustees, fund managers, custodians and other stakeholders in the pension industry who want to increase their benefits from the new pension scheme.
The new Pensions Law caters for the establishment of a contributory three-tier pension scheme with a Pensions Regulatory Authority to oversee the administration and management of the composite scheme.
Since January 2010, when the new Pension Act came into force, companies have made a mandatory 18.5 percent contribution to both Tier-1 and Tier-2 schemes. These payments have been made to the Social Security and National Insurance Trust (SSNIT), although the Tier-2 funds are being held in trust at the Bank of Ghana.
According to the Pensions law, the funds must be released from the Bank of Ghana to the trustee accounts within 90 days of licencing. Dr. Baah said once the licences are given to the stakeholders, the pension funds will be released to them with details of how much each worker has contributed and the returns made.
ï¿½There is a Database Management company that is tracking the contribution of workers to ensure that the returns on investment are credited to their name. As soon as the licences are provided, statements will be sent to each individual contributor to enable them to know their status.
ï¿½The biggest challenge has to do with how the pension funds, once transferred from the Bank of Ghana, are going to be managed. We are encouraging our members to form master-trusts in the Tier 2 so that workers in one sector will choose a single or multiple trustees to manage their funds for them and a common custodian,ï¿½ he said.
B&FT understands that the NPRA operations are currently being hampered by constraints on resources which must be provided by the government, even though the Authorityï¿½s operations are expected to be internally funded through levies charged on the pension scheme.
ï¿½It is a question of priority. The government has a number of priorities, and so far it looks like the NPRA has fallen quite low on the list of priorities,ï¿½ the Pensions regulatory official added. Last week Friday, the NPRA met stakeholders in the pensions sector in what was expected to be the last deliberations to pave the way for licences to be released to trustees, fund managers and custodians.
The coming into force of the Pensions Act demands that trustee companies are licenced to manage the second and third tiers of the pension scheme, following concerns for a pension scheme that will consider the plight of workers in the informal sector, who constitute about 85% of the working population in Ghana.
The new contributory three-tier pension scheme comprises two mandatory schemes and a voluntary scheme, which includes a first-tier basic national social security scheme.
The second-tier occupational pension scheme wherein the trustee companies will operate is mandatory for all employees, but it is privately managed and designed primarily to give contributors higher lump-sum benefits than is presently available under the SSNIT pension scheme.
The third tier voluntary provident fund and personal pension scheme is supported by tax benefit incentives to provide additional funds for workers who want to make voluntary contributions to enhance their pension benefits, and also for workers in the informal sector who are not catered for by the first two mandatory schemes.
It is envisaged that the new three-tier pension scheme will enhance pension benefits and increase the retirement income security of workers in both the formal and informal sectors.
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