By Joshua Worlasi AMLANU
The Social Security and National Insurance Trust (SSNIT) has allayed fears regarding its long-term financial viability, responding to claims that the pension fund’s reserves could be depleted by 2036. “The scheme presently receives contributions and has enough funds to pay accruing benefits due members,” SSNIT said in a statement issued by management.
The statement follows recent posts circulating on news portals and media outlets suggesting an inability to pay benefits beyond 2036 due to reserve depletion, based on an actuarial valuation by the International Labour Organization (ILO) as of December 31, 2020.
“The SSNIT pension scheme, as set up by ACT 766, is a partially funded scheme, and pension payments are funded from contributions and returns from investments,” the statement read, adding that “pension payments are not funded by reserves.”
SSNIT highlighted “steady growth in contributions” supported by expanding demographics and efforts to enroll new employers and contributors. The Trust also cited “healthy” investment income that “would offset any unexpected deficits that may arise”.
Furthermore, SSNIT stated that “the government is current in the payment of contributions on behalf of its workers” with processes in place to service outstanding amounts. “The Trust has never missed any pension payment since 1991…and will continue to ensure prudent management of the fund to meet its benefits payment obligations beyond 2036,” it assured.
The actuarial valuation by the ILO painted a less optimistic picture. The ILO assessment warned that from 2029 onward, “total income (contributions, investment income and other income) is no longer sufficient to pay for annual expenditures” with reserves projected to be depleted by 2036.
To address the potential funding gap, the ILO recommended increasing SSNIT’s contribution rate from the current 11 percent up to 22 percent to fully fund obligations over 75 years. Other suggestions include revising the basis for calculating insurable earnings, shifting to inflation-based pension indexation rather than wage growth, and implementing a comprehensive funding policy. “The magnitude of an increase in the contribution rate should depend on clear financing and funding objectives,” the ILO stated.
The ILO added that “while such objectives do not exist at SSNIT, it is known that SSNIT is currently working on a funding policy”.
The ILO encouraged SSNIT’s funding policy efforts, stating: “The authors of this report expressly wish to commend SSNIT for working on a funding policy and encourage them to continue in this direction. The ILO is ready at any time to support SSNIT with these important steps.”
Emphasising the importance of a robust policy framework, the ILO recommended SSNIT “formalise the long-term funding objectives of the scheme; better understand the risks and advantages of financing options; ensure that plan assets are sufficient to deliver the promised benefits; and enhance corporate governance by increasing transparency.”
