Phase out CAP30 to level pension playing field – expert

Government must speed up the process of phasing out the CAP30 pension scheme and other similar schemes, and migrate everyone onto the three-tier pension scheme introduced a decade ago to level the field, Daniel Aidoo Mensah, a research fellow at the Institute of Fiscal Studies (IFS) – a public policy institute – has said.

“The CAP30 scheme must be phased out quickly to eliminate the inequalities that presently exist, as recommended by the Pensions Commission and stipulated in the new pensions law,” he said at a national dialogue on pensions organised in Accra by the IFS on the theme ‘Ghana’s Pension System – Is it Working?’

While calling for the removal of CAP30, Mr. Mensah – who served as the first Acting CEO of the National Pensions Regulatory Authority (NPRA) – added that there is a need to give assurances and allay the apprehension of those currently on the system about the safety and benefits of the new 3-tier scheme and the protection of their pension rights.

“They will be interested to know that Section 219 of Act766 provides a guarantee of their accrued retirement benefits rights under the CAP30 scheme. They will also be interested to know that the lump-sum benefit of the second-tier is about 1.5times the lump-sum benefit provided under the CAP30 scheme for a 30-year contributor,” he added.

Mr. Mensah pointed out that pension issues must be placed on the front-burner of the national agenda and be given the needed financial and material support. “They must also be devoid of any political interference,” he said.

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Pension experts have consistently called for phasing-out the CAP30 and other similar pension systems which preceded the Social Security and National Insurance Trust (SSNIT) and the three-tier pension system. The experts have argued that paying retirees who haven’t contributed to a scheme from the consolidated fund is unsustainable.

An analysis of the CAP30 system shows that government paid GH¢1.3billion in 2018 or GH¢105million per month through the scheme, which was supposed to be outlawed by 2014. The figure is expected to exceed more than GH¢1.5billion this year.

When government, through Cabinet, gave an approval earlier this year for a roadmap to be developed to unify all pension schemes in the country by 2021, the beneficiaries of the CAP30 system expressed their worries and noted that they would resist any change that adversely affects their livelihoods and pensions.

The Minority in Parliament issued a statement, in April, that called on President Nana Akufo-Addo to revoke the decision to migrate the Ghana Police Service and other security agencies from the CAP 30 Pension Scheme to the SSNIT Pension Scheme, in an attempt to unify pension schemes in the country.

“It [the Minority] is appalled by the decision of President Akufo-Addo to migrate the Ghana Police Service and other security agencies from the CAP 30 Pension Scheme to the SSNIT Pension Scheme. The announcement has generated considerable tension and widespread agitation within the rank and file of the said security agencies,” describing it as “a development that portends great danger for our national security.”

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Government quickly backtracked and dismissed reports that it was planning to remove the security services from the CAP30 scheme. Vice Chairman of the Parliamentary Select Committee on Defence and the Interior, Collins Owusu-Amankwah, said some people suddenly decided to take this government on for information that is a palpable falsehood.

“They should disregard that notion. We have no intention of migrating them (police) as we speak from CAP30 to the SSNIT pension scheme. There is no arrangement of that sort,” he said.

Deputy Minister, Bright Wireko Brobbey – speaking at the national dialogue on pensions this week, assured beneficiaries of CAP30 that no change will affect existing beneficiaries of CAP30. He explained that no reform will wipe out any benefit people had accrued under an old system, adding that if there is any reform it will instead be targetted at new people.

The CAP 30 pension scheme is a non-contributory pension scheme instituted in 1950 under the Pensions Ordinance, No. 42 of Chapter 30, for civil servants in the service before 1972. While SSNIT benefits are funded from contributions by members, the CAP30 scheme is not funded and benefits are paid from the Consolidated Fund. CAP30 is not based on actuarial principles; lump-sum payments are not discounted to allow for time value of money.

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