NPRA sensitises general public on three-tier pension scheme
A special provision has been made in the third-tier voluntary personal pension scheme of the new three-tier pension scheme to cater for the peculiar needs of workers in the informal sector of the economy.
The informal sector, which constitutes about 80 per cent of Ghana’s workforce, would elect to contribute any amount they could afford on a regular basis to the scheme, Mr Emmanuel Awuku Dagbanu, Manager responsible for Corporate Affairs at the National Pensions Regulatory Authority, said.
He said the new three-tier pension scheme has two mandatory schemes and a voluntary scheme such as first-tier and second-tier.
Mr Dagbanu said this when addressing informal sector workers in Wa as part of the NPRA’s mandate to educate and sensitise the general public on the scheme.
He said third-tier is a voluntary provident fund for group or personal pension schemes, supported by tax benefit incentives to provide additional funds for workers in the formal sector who want to make voluntary contributions to enhance their pension benefits, and also for workers in the informal sector.
He said the benefits that would be accrued would depend on how much contribution is made and the returns on investment.
Mr Dagbanu said people in the informal sector who are not covered by the mandatory schemes, would have 35 per cent of their declared income, exempted from tax for contribution purposes; while investment income from investment of scheme funds would also be tax-exempted.
He said the informal sector contributors would have two accounts- a retirement account to provide benefits on retirement and a personal savings account with rules for withdrawals before retirement, especially for education and business enhancement.
Mr Dagbanu said contributors could access benefits before retirement from personal savings accounts and the proceeds of the retirement account would be paid on the retirement of the contributor as monthly or quarterly pensions.
He said their counterparts in the formal sector on the first and second tiers of the new scheme would also receive monthly pensions from the retirement account as well as a lump sum from their personal savings account to begin retirement.
Mr Dagbanu said the informal sector could participate in the scheme as organised groups or individuals, establish their own schemes and seek technical advice or outsource administration and other technical work to third party administrators.
He said all the pension funds and assets would be kept by a custodian, which is a bank or financial institution registered by the NPRA but the choice of custodians would be made by the group.
“It is envisaged that the inclusion of workers in the informal sector in the new three-tier pension scheme, would enable them to save towards their old age or even as an invalid. This will improve their living standards and secure financial autonomy and independence in their old age”, Mr Dagbanu said.
On the first- tier, he said, it is a mandatory basic national social security scheme, which incorporates an improved system of Social Security and National Insurance Trust (SSNIT) benefits for all employees in both the private and public sectors.
The second-tier is also an occupational or worker-based pension scheme, mandatory for all employees but privately managed and designed primarily to give contributors a higher lump sum benefits than previously available under SSNIT pension scheme.