Preparing for a comfortable life after retirement is a deliberate action. It doesn’t just happen. It requires making immediate sacrifices for future benefit; which benefit will extend beyond the individual. We often express one’s wealth by the things he possesses.
Hear what the Bible as well as Dave Ramsey have to say.
“And he said to them, take care, and be on your guard against all covetousness, for one’s life does not consist in the abundance of his possessions.” Luke 12:15
“We buy things we don’t need with money we don’t have to impress people we don’t like.” Dave Ramsey
With this understanding, we can begin to discuss retiring before the mandatory age of 60. The Pensions law allows for early retirement after 55 years. One becomes fully entitled to his/ her Tier 2 benefits as well as the Provident Fund (if any). However, the benefits under Tier 1 (SSNIT) will be discounted.
REDUCED PENSION – EARLY RETIREMENT UNDER TIER 1
A contributor to the First Tier can qualify to retire voluntarily to earn a reduced pension on meeting the conditions below:
- You must be 55 years and above but below 60 years of age; and
- You must have made a minimum contribution 180 months (15 yrs.) under act 766 and 240 months (20 yrs.) under PNDCL 247.
EARLY RETIRMEMENT – AGE REDUCTION
For early retirement reduction with factor from 55 years and below 60 years, the pension is computed as follows:
| AGE (Years) | % of Full Pension |
| 55 | 60% |
| 56 | 67.50% |
| 57 | 75% |
| 58 | 82.50% |
| 59 | 90% |
Illustration 1
Mr. Mensah will be 60 years in December 2021. He had his first formal employment in January 2004 on an annual salary of GH¢18,000 (GH¢1,500 monthly). Salaries are reviewed upward each year by 5%. What would be Mr. Mensah’s monthly pension when he eventually retires?
Solution
Monthly & Annual Salaries
| Year | Annual Salary | Year | Annual Salary | Year | Annual Salary |
| 2004 | GH¢18,000 | 2011 | GH¢25,328 | 2018 | GH¢35,639 |
| 2005 | GH¢18,900 | 2012 | GH¢26,594 | 2019 | GH¢37,421 |
| 2006 | GH¢19,845 | 2013 | GH¢27,924 | 2020 | GH¢39,292 |
| 2007 | GH¢20,837 | 2014 | GH¢29,320 | 2021 | GH¢41,256 |
| 2008 | GH¢21,879 | 2015 | GH¢30,786 | ||
| 2009 | GH¢22,973 | 2016 | GH¢32,325 | ||
| 2010 | GH¢24,122 | 2017 | GH¢33,942 |
Mr. Mensah’s total contributions would be for 18 years which qualify him for full pension under Act 766. He will earn a pension right of 40.88%. Again, the average of his best 3 years’ annual salary will GH¢39,323 (GH¢3,277).
Hence, his pension would be
Annual Pension = 39,323 * 40.88% = GH¢16,075
Monthly Pension = 3,277 * 40.88% = GH¢1,340
Illustration 2
If Mr. Mensah Just turned 55 years and decides to retire, his pension right of 40.88% will be discounted by 40%. Hence, his earned pension right becomes 24.53% (40.88% * 60%).
His pension would then be computed as
Annual Pension = 39,323 * 24.53% = GH¢9,645.93
Monthly Pension = ,277 * 24.53% = GH¢803.85
Illustration 3
Under the same circumstances, if he decides to retire at age 58, his pension right of 40.88% will be discounted by 17.5%. Hence, his earned pension right becomes 33.73% (40.88% * 82.5%).
His pension would then be computed as
Annual Pension = 39,323 * 33.73% = GH¢13,263.65
Monthly Pension = 3,277 * 33.73% = GH¢1,105.33
Clearly, the age at which one retires is very critical in ascertaining the pension payment. Hence, it is overly necessary for one to weigh all the options of retiring voluntarily before eventually making a decision.
The above notwithstanding, a worker at an underground mine, steel work or any other employment considered as hazardous employment by the National Pensions Regulatory Authority can retire at age 55 with full retirement benefits provided he/ she satisfies the minimum aggregate contribution period of 180 months or 15 years.
REFUND OF CONTRIBUTIONS
In the event that you do not qualify for Old Age Pension when you retire either compulsorily or voluntarily; your contributions will be refunded to you with interest.
QUALIFYING CONDITIONS
- You must be between 55 and 60 years.
- Where you have not made the minimum aggregate contribution period of 180 months, you will be entitled to a lump sum payment of your total contributions with interest.
HOW TO APPLY
- Contact the nearest SSNIT Branch with your Smart Card or Biometric Card, letter of retirement from your employer—not mandatory.
- The SSNIT Branch will then provide you with a Pension Application Form for completion.
- Submit your completed Form to the SSNIT Branch.
- Provide an active bank account number that bears your name—evidence of bank account details.
- SSNIT will advise you to collect your monthly pension at your bank
Pensioners after attaining the age of 72 years for those under PNDCL 247 and 75 years for those under Act 766 would be required to go through identification process yearly.
HOW LONG WILL YOUR PENSION PAYMENT LAST? Until Death
(Credit: SSNIT, Pensions Act)
