The beauty of the Three-tier pension scheme under successive governments


In line with the law’s dictate to open regional offices and district officers across the country, the National Pensions Regulatory Authority (NPRA) between 2016 and 2021 opened five zonal offices to augment its efforts of reaching out to every Ghanaian worker with the message of pension and retirement planning.

It will soon open its office in Koforidua followed by Ho and other regions. This is how the first part ended.

The 3-tier pension scheme born, out of the major pension reforms by President J.A. Kufour, has also seen a high level of beautiful political will and commitment which have translated into a fascinating continuity in Ghana’s pensions reforms.

Since initiation of the reforms by the former president, all other successive governments – and presidents for that matter – have shown commitment and zeal to facilitating the reforms process.

The demonstration of interest, zeal and fortitude by past and present governments has not only helped growth of the industry but, importantly, also gone a long way in assuring the populace and regenerating their confidence in the pensions industry – which is key in any financial delivery system.

After former President Kufuor signed the pensions act into law in 2008, President J.E.A. Mills launched the 3-Tier Pension Scheme in September 2009 and also set up the first governing board of the National Pensions Regulatory Authority. He also appointed Daniel Aidoo Mensah, an actuarial scientist and pension consultant, as the first Acting Chief Executive Officer of the Authority.

His government also saw passage of the Basic National Security Scheme Regulations, 2011 [L.I.1989], as well as the Occupational and Personal Pensions Scheme [General] Regulations, 2011 (L.I 1990).

Former President John Mahama also demonstrated commitment to the national reforms process. Under his government, two zonal offices were opened at Kumasi and Tamale in 2016. Under his government an agreement was reached for the first phase of the government of Ghana and Swiss government support to the NPRA through the SECO Project, which officially started in July 2014.

The Swiss government provided a grant of US$2.4million to Ghana’s government to support the Authority in performing its role as sole regulator of the pensions industry. This was to assist the Authority resolve issues of Temporary Pension Fund Accounts and provide information technology support for the implementation of a risk-based system, which is to help the NPRA comply with International Organisation of Pension Supervisors (IOPS) principles and review the existing regulations and guidelines.

It was also to build the Authority’s capacity to ensure a pension system that protects and promotes the interest of pensioners while advancing the country’s development agenda.

President Mahama’s administration also saw inauguration of the Informal Sector Working Group to develop mechanisms for attracting informal sector workers to the then newly-introduced 3-tier pension scheme, by extending pension coverage into the informal sector in a bid to promote national development. The investment Guidelines Review Committee under the Chairmanship of Prof. Joshua Abor, Dean-University of Ghana Business School, was also inaugurated to review the industry’s first investment guidelines after six years of implementation to make them more impactful on the economy – as well as ensure prudent investment of pension funds in the interest of contributors.

In April 2017, four months into the administration of President Nana Addo-Dankwa Akufo-Addo, the Authority was weaned off government subvention, providing autonomy to ensure effective administration and operations of the Authority. It also provided management and the NPRA Board freedom to operate as a regulator. This has helped in the opening of three new offices in Takoradi, Sunyani and Tema between 2017, and 2021 enabling NPRA to improve on pension coverage in the country.

The government of Nana Akufo-Addo has been keen on activities of the NPRA and general growth of the pensions industry. The president has also shown commitment and great interest in the welfare of workers in pension matters. This is evident in the amendment of the Income Tax Act to exempt withdrawals from third-tier provident funds and personal pension schemes from tax. The 15 percent tax-waiver on withdrawals was to cushion workers and individuals who have lost their jobs or capital due to COVID-19.

President Nana Addo Dankwa Akufo-Addo’s commitment to resolving outstanding issues saw government transferring over GH¢3.1billion Tier 2 pension contributions in the TPFA at the Bank of Ghana to the custodial accounts of various public sector pension schemes in 2019, a move that brought closure to a six-year tussle between the government and labour unions over management of the funds.

“We have been able to transfer some GH¢3.1billion of Tier-2 pension funds into the custodial accounts of the labour unions’ pension schemes – funds that have been outstanding for six years and about which the labour unions have been loudly complaining,” he said. The transfer also meant that the public sector schemes are now fully operational.

President Nana Akufo-Addo’s high-level commitment to the pensions reforms was also demonstrated when he set up a committee to address one of the most outstanding transitional issues in the pensions reforms, which is the ‘Past Credit’.  Against this backdrop, he announced at the commissioning of the Trade Union Congress (TUC) refurbished offices that his government will resolve the issue of ‘Past Credit’ for public sector workers who retire from January 2020.

He said government will pay the difference in lump-sum payments to pension beneficiaries of PNDC Law 247 and Act 766 for those retiring in 2020, with effect from 1st January 2020 to 31st December 2020.

He recalled the contents of a letter dated 24th August 2020, sent to him by the Secretary-General on behalf of the TUC requesting his intervention to “correct the injustice and unfairness in implementation of the three-tier pension system”.

President Akufo-Addo told the gathering that he referred this matter to the Senior Minister, Yaw Osafo Maafo, who after careful studies and deliberations has laid out the position of government on this matter.

Indeed, 2020 marks the transition year when all public sector workers retiring under the Three-Tier Pension Scheme are having their pensions paid under the National Pensions Act, 2008, Act 766.

Even though Act 766 offers higher monthly pensions and better lifetime benefits to workers compared to the erstwhile PNDC Law 247, some workers who retired in the early part of 2020 may receive a lower lump-sum (made up of the past credit paid by SSNIT and the Tier-2 compared to that paid under PNDCL 247), with the president adding that “a committee will be established to supervise the implementation of this decision” to ensure equity prevails and no pensioner is made worse-off.

Pensions in Ghana, therefore, are so dear to the operations of every government; and the Ghanaian working population must have such confidence in the pension industry that under no circumstance can their contributions be jeopardised – particularly because of a change of government or government policies and actions.

Non-pension contributors must also take advantage of this politically-friendly situation and contribute toward their retirement and old age. “The best time to start thinking about your retirement is before the boss does.”

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