Frequently Asked Questions
Q: Q1. What is the contributory 3-Tier Pension Scheme?
Answer
It is the new pension scheme established by the National Pensions Act, 2008 (Act 766) that replaces the previous SSNIT pension scheme and other parallel schemes
Q: Q2. How is it different from the SSNIT scheme under the PNDCL 247?
Answer
This new scheme has a 3-Tier structure with private involvement in the management and an establishment of a regulatory body instead of the previous arrangement under PNDCL 247.
Q: Q3. What is the objective of this scheme?
Answer
The objective of the scheme is to:
Ø Provide pension benefits to ensure retirement income
security for workers.
Ø To ensure that any worker receives retirement and
related benefits as and when due.
Ø Establish a uniform set of roles regulations and
standards for the administration and payment of retirement and related benefits
for workers in the public and private sector
Q: Q4. What are the components of this contributory 3-Tier Pension Scheme?
Answer
This contributory 3-Tier pension schemes consists of:
1st-Tier ? A Mandatory basic National Social Security Scheme
2nd- Tier - A mandatory fully funded and
privately managed occupational pension scheme
3rd-Tier - A voluntary fully funded and privately managed
provident fund and personal pension scheme.
Q: Q5. What is the total contribution from the Employer and the employee into the 1st and 2nd Tier Mandatory schemes of the 3-Tier Pension Scheme and how is it different from the old SSNIT scheme?
Answer
The total contribution from the employer and the employee
under the new scheme is 18.5% and is distributed as follows:
New Scheme (Act 766) Employer-13%
Employee-5.5%
Total =18.5%
Old SSNIT Scheme (PNDCL 247))-Employer - 12.5%)
Employee - 5%
Total= 17.5%
Q: Q6 which year did the 3-Tier Pension Scheme take effect?
Answer
The 3-Tier Pension Scheme took effect from 1st January 2010.
Q: Q7 What is the CAP 30 Pension Scheme?
Answer
It 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.
Q: Q8. Is CAP 30 sustainable?
Answer
No! This is due to the non-contributory nature of the scheme and the increasing pressure on the consolidated funds from which the CAP 30 benefits are paid.
Q: Q9. What happens to the Security Services with the introduction of the 3-Tier Pension scheme?
Answer
All pension schemes in Ghana including that of the Security Services shall be unified under the 3-Tier Pension Scheme in compliance with the National Pensions Act, 2008 (Act 766) as amended.
Q: Q10. What is the membership entry age for a worker onto the 3-Tier Pension Scheme?
Answer
Eligible workers are those who are 15 years and above, and those who are less than 50 years as at Jan. 2010.
Q: Q11. What is the minimum income level on which social security deductions are made?
Answer
Social Security contributions are based on 18.5% of
approved monthly equivalent of the daily minimum wage.
Q: Q12. What is the maximum income level on which social security deductions are made?
Answer
The maximum income level is determined periodically by SSNIT in consultation with NPRA.
Q: Q13. Is the 3-Tier Pension scheme compulsory for all formal sector workers in Ghana?
Answer
Yes, it is compulsory for all formal sector workers to join the 1st and 2nd-Tier mandatory schemes. The 3rd- Tier is however voluntary.
Q: Q14. What is the background and position of the contributions paid into the 2nd-Tier Schemes since 2010?
Answer
The contributions since 2010 are being lodged in a Temporary Pension Fund Account (TPFA) at the Bank of Ghana and are invested in Treasury Bills and the interest paid to the account of the contributors. Currently the audited funds are being transferred to registered schemes.
Q: Q15. Are companies who registered their 2nd tier schemes still paying their contributions into the TPFA?
Answer
No. Such companies are paying their 2nd-tier contributions directly to the Custodian Banks of their registered schemes.
Q: Q16. What is an Occupational Pension Scheme?
Answer
Occupational Pension Scheme is a pension scheme that is
work-based, established under a trust which provides benefit based on a defined
contribution formula in the form of a lump sum payable on termination of
service, death or retirement, or in respect of persons covered under section 58
of Act 766 and other persons specified under the 2nd tier scheme.
Q: Q17. How can a first time contributor who is more than 45 years and less than 50 years join the 3-Tier Pension Scheme?
Answer
Such workers can participate in the 3-tier pension scheme by joining the occupational pension scheme ? all their contributions of 18.5% would be paid into the 2nd tier occupational pension scheme.
Q: Q18. What is the contribution rate of the 2nd-Tier occupational pension scheme?
Answer
5% of the total contribution of 18.5% goes into the occupational pension scheme.
Q: Q19. What kind of benefits will those who contribute the total 18.5% into the occupational pension scheme receive?
Answer
Such people will receive 25% lump sum of their total accrued benefits and the remaining 75% will be used to buy an Annuity from an approved Insurance Company which will be paid to the person on monthly basis.
Q: Q20. At what age can one join the Occupational Pension scheme?
Answer
One can join the Occupational Pension Scheme from 15years
and above.
Q: Q21. What kind of benefit is paid under the 2nd ?Tier Occupational Pension Scheme?
Answer
The 2nd ?Tier is designed to pay lump sum and
other related benefits to members of the scheme on retirement.
Q: Q22. At what age can one claim his/her benefit under the 2nd- Tier scheme?
Answer
A contributor can claim his/her 2nd -Tier benefits at retirement (ie 55years -60years). However a contributor can claim the benefits at age 50 if he/she is unemployed.
Q: Q23. If I owe a personal debt, can the accrued benefits in my Occupational Pension Scheme be attached in execution of the debt?
Answer
No, that is illegal and is not permitted by Act 766. The law however, allows a member to use that member?s benefit to secure a mortgage for the acquisition of a primary residence only.
Q: Q24. For how long shall an employer hold the contributions before remitting it to the appropriate scheme (i.e. to the trustees of the Occupational Pension Scheme)?
Answer
The contributions shall be remitted by the employer to the appropriate scheme within fourteen (14) days from the end of each month of the contribution.
Q: Q25. What would happen to the contribution of a worker who under the Occupational Pension Scheme or Provident Fund Scheme has changed employment?
Q: Q26. What is a Provident Fund Scheme?
Answer
Provident Fund Scheme is a scheme, governed by
a trust to which a contributor or contributor?s employer or both contribute to
a pension scheme which provides benefits based on a defined contribution
formula to provide for the payment of
a) Lump sum
benefits to the members of the scheme when they reach the retirement age, or
any other prescribed event occurs in relations to them or
b) In the case of
members who die before reaching that age or before the occurrence of such an
event, provides for the payment of those benefits to the personal
representatives or beneficiaries of the estates of those members.
Q: Q27. How do you reconcile the 3rd-Tier Provident Fund scheme and the old Provident Funds that existed before the introduction of Act 766?
Answer
The companies operating old Provident Fund Schemes must register the scheme with NPRA and modify existing rules and regulations of the scheme in compliance with the National Pensions Act 2008 (Act 766), the regulations and the guidelines issued by the Authority.
Q: Q28. Is there any benefit for registering the Provident Funds Schemes under the National Pensions Act, 2008 (Act 766)?
Answer
Yes.
a. The contributor gets 16.5% tax exemption on his/her
income from which the contributions were made. b. The interest of members will be protected by the
Pensions Authority, overseeing to the administration and management of the
schemes. c. The rules and regulations of the scheme will conform
to the Act which ensures that the sponsor has no undue influence in the
management of the scheme and also ensure that the scheme funds/assets are
separated from that of the trustees and the employer/sponsor. d. The law also provides one-third representation of
members on the Board of trustees managing the scheme. This provides an
opportunity for the members of the scheme to have a say in the management of
their contributions. e. The fees charged by the services providers are also
regulated to avoid arbitrary charges that may affect the scheme.
Q: Q29. What is a Personal Pension Scheme?
Answer
A Personal Pension Scheme is any scheme to which the contributor contributes personally to provide benefit based on a defined contribution formula in the form of pensions to the member or otherwise payable on death or retirement to their beneficiaries.
Q: Q30. What is a Group Personal Pension Scheme?
Answer
A Group Personal Pension Scheme is a pension scheme formed by individual persons with common identity/relationship who come together as a group and contribute into a pension scheme they have registered to provide a pension benefits and other benefits as may be described in their rules and regulations.
Q: Q31. What is the target group of the Group/Personal Pension Scheme?
Answer
The group/personal pension scheme is designed primarily for workers in the informal sector and the self-employed.
Q: Q32. Can a formal sector worker also participate in a Personal Pension Scheme?
Answer
Yes; apart from participation in the 1st, 2nd, and 3rd tier provident fund (if available at the work place), the worker can also contribute to a personal pension scheme to enhance his/her retirement benefits.
Q: Q33. What are the two accounts of the Informal Sector/Self-employed contributors?
Q: Q34. How is the distribution of informal sector contribution done?
Answer
The rules and regulations of the scheme determines how the distribution should be done into the two accounts.
