Empower NPRA to unify pensions – Osei Akoto
The Chief Executive Officer (CEO) of Stallion Trust & Administration Company Limited, Mr Charles Osei Akoto, has called for a review of some provisions of the Pensions Act (Act 766) to, among other things, empower the National Pensions Regulatory Authority (NPRA) to be able to unify pensions in the country.
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He observed that while Act 766, as amended, had made some significant strides, there were still lapses with some portions, a typical example being section 213.
Although the section aimed to unify pensions by bringing all persons under the three tier scheme, Mr Akoto said the regulator had failed, for instance, to enforce that requirement, thereby creating room for the establishment of various pension schemes, some of which are without funds.
The schemes are mostly owned and operated by the security forces, Mr Akoto said at the Graphic Business/Stanbic Bank Business Breakfast Meeting on Pensions at the Labadi Beach Hotel on September 19.
He was speaking on the expectations of the contributor in the pensions industry at the event that was chaired by the CEO of the NPRA, Mr Hayford Atta Krufi.
“The government has allowed some of these security services to set up schemes, which do not have funds and that is disturbing because it defeats the very purpose of the law,” he said.
Presently, the Social Security and National Insurance Trust (SSNIT) provides defined benefit plans for formal workers in the public sector. This means that the formula for computing employers’ and employees’ contribution is defined and known in advance but the Judicial Service, the Prisons Service and the Police Service, which are mandated by law to operate under this scheme have failed to join SSNIT.
Other areas
Mr Akoto again noted that the occupational pension scheme under the Act did not establish a vesting period that would determine when employees could access accrued funds paid on their behalf by their employer.
Vesting, according to the Act, is the process by which an employee accrues non-forfeitable rights over employer-provided stock incentives or employer contributions made to the employees’ qualified retirement plan account or pension plan.
“Leaving the vesting period open does not favour employees because employers will now determine when these funds can be assessed and in some cases, they will set the vesting period to 15 years, which is 10 years more than that of the United States (US)” he said.
Explaining pensions
Mr Akoto indicated that pensions were often mistaken to mean the payments of benefits during retirement alone, but it involved the establishment of a pension plan, employee enrolment and payment of contributions before the payment of benefits.
He said under the private pension scheme, the employer establishes a pension programme for the sole benefit of the employees, but this plan could either be compulsory or voluntary, whereas the state establishes a pension scheme by law for the sole benefit of the members, meaning the membership, contributions, benefits and other provisions are all prescribed under the law.
Managing pension funds
On the management of pension funds, Mr Akoto said it was the collective responsibility of the trustees and the regulator to ensure that expectations of contributors were met.
He said undertaking prudent investments, communicating with contributors about the state of their savings and providing protection against causes of economic insecurity were measures to be taken by both trustees and the regulator.
That, he said, would help reduce the pressure on the government to provide security for contributors on retirement and channel its resources towards infrastructure development on a sustainable basis.
Growth of pension funds
Over the past four years, growth in the tier two and three pension funds has averaged 70 per cent on a yearly basis, as more employers and employees come to terms with the three-tier pension scheme introduced in 2010.
From a modest sum of GH¢805.1 million in 2012, tier two and three contributions, which are managed by private schemes, rose to GH¢2.6 billion in 2014 before closing last year at GH¢6.8 billion.
The increment from GH¢6.8 billion in December 2016 to GH¢8.3 billion in July this year represents a growth rate of 22.1 per cent within the seven-month period, consistent with the average annual growth rate.