Three-tier pension to increase retirement income security for workers – NPRA

The three-tier pension system will enhance pension benefits and increase retirement income security for workers both in the formal and informal sectors of the economy and improve on the nation’s economic future.

Mr Hayford Attah Krufi, Chief Executive Officer, National Pensions Regulatory Authority (NPRA), said the three-tier pension system, which was introduced in January 2010 as part of national pensions reform process, sought to ensure that every worker received retirement and related benefits.

He said the objectives of the three-tier pension include diversification of the sources for pensions provision, enhancement of quantum pension include and the establishment of a uniform set of rules, regulations and standards for the administration and payment of benefits of workers.

Delivering his presentation at the 71st Annual New Year School and Conference at the University of Ghana, Mr Krufi said Ghana’s Reformed Pension System has a three-tier structure, compromising two mandatory schemes (first and second tiers) and a voluntary scheme (the third tier).

The 71st Annual New Year School and Conference is on the theme: “Attaining Ghana Beyond Aid: Prospects and Challenges.”

It is being organised by the School of Continuing and Distance Education, University of Ghana.

The Annual New Year School and Conference was introduced in 1948 and it brings together people from all walks of life to deliberate on topical issues of national and international interest.

Mr Krufi said the First Tier was a mandatory Basic National Social Security Scheme, which was a defined benefit scheme.

He said the contribution rate was 13.5 per cent of basic salary, including 2.5 per cent for National Health Insurance Scheme; adding that it only pays monthly pensions.

He explained that the Second Tier was a mandatory, privately emanated Occupational Pension Scheme, which was a defined contribution scheme and pays lump sum benefits; stating that the contribution rate was five per cent of basic salary.

Mr Krufi said the Third Tier was a voluntary, privately-managed Provident Fund and Personal Pension Schemes.

He said the Third Tier was on a defined contribution basis and was supported by tax incentives.

He said the Personal Pension Scheme applies to individuals in the informal sector who were covered by any pension scheme under the mandatory part of the three-tier pension scheme.

Mr Krufi said the Scheme also applies to individuals who want to make voluntary contributions to enhance their pension benefits outside the mandatory schemes or Provident Fund Schemes.

On how far has the pension reform come? Mr Krufi said in terms of pension assets: the total pension assets for both the Social Security Funds and the Private Pension Funds together form GH¢5.1 billion (being 6.75 per cent of gross domestic product (GDP)) to GH¢23.5 billion (seven per cent of GDP).

“We have, as of December 2019, 241 Private Pension Schemes comprising Employer-Sponsored Master Trust Occupational Pension Schemes, Employer-Sponsored Master Trust Provident Fund Schemes, and Personal/Group Pension Schemes.”

He said with respect to the Private Service Providers, there were 30 Corporate Trustees, 49 Pension Fund Managers, 14 Pension Fund Custodians and 1,112 Individual Trustees.

With regards to the Ghana Beyond Aid Agenda, Mr Krufi said the vision calls for transforming the nation’s economy.

Source: GNA