SSNIT begins actuarial valuation of pension scheme
The Social Security and National Insurance Trust (SSNIT) has launched a comprehensive actuarial valuation of the pension scheme it manages to determine its true state of affairs.
The process which is expected to last for a couple of months is the first by the Trust after the passage of the new Pension Act, which has reduced the contributions of workers to the scheme.
According to the Director-General of SSNIT, Dr Frank Odoom, “It is the actuarial valuation of the scheme that can give a better picture of the scheme and also allow SSNIT to take corrective measures to sustain the scheme.”
The new Act has created a three-tier concept meant to provide more options for people to plan for their retirement.
The objectives of the Pension Act are to provide pension benefits to ensure retirement income security for all categories of workers in the country.
It is also to ensure that workers receive retirement and related benefits as and when they are due, and to establish a uniform set of rules, regulations and standards for the administration and payment of retirement benefits for workers, both in the public and private companies and institutions.
The new Pension Act provides for pension in the country through the introduction of a contributory three-tier pension scheme, the establishment of a National Pensions Regulatory Authority to oversee the administration and management of registered pension schemes and Trustees of registered schemes as well as the re-establishment of a Social Security and National Insurance Trust to provide for related matters.
The first tier is a mandatory occupational scheme to be run by a restructured SSNIT. Contributions will be 13.5 per cent of gross salary. Retirement benefits will be only in the form of monthly income and death and invalidity benefits should a contributor die before retirement. SSNIT will no longer pay the one-off lump sum benefit at retirement.
The second tier is another mandatory occupational scheme to be run by approved Trustees licensed by the regulatory body but managed by private fund managers. Contributions to the scheme would be five per cent of the employee’s gross salary. Benefits would be lump sum payments which are expected to be higher than presently exists under SSNIT and CAP 30.
The third tier is voluntary fully funded provident fund and personal pension scheme managed by private fund managers.
Before the passage of the Act, there was an actuarial report which indicated that workers contributions of 17.5 per cent of their salary should be contributed to the scheme each month to ensure its sustenance.
The report also suggested that the scheme needed to record at least 2.25 per cent of real returns on all its investments to make the scheme sustainable.
But Dr Odoom said, “I believe that with the rough calculations from the gap created with the benefits and the changing the dynamics in the system, we need four cent real returns to bridge that cup.
He said because of the new Act, the contribution of workers has been reduced by four per cent to 13.5 per cent.
There is a further reduction of two per cent which is used to cater for the National Health Insurance Scheme of contributors.
Dr Odoom said there were more than one million contributors who were paid pensions on a monthly basis.
“GH¢40 million paid is to 120,000 pensioners in the country every month,” he disclosed.
That, he said, had gone up from about GH¢36 million the previous year but for the indexation which is the review of the annual increments they receive.
Dr Odoom added, “the report is expected to be interesting” and noted that the valuation is done every three years but this is the first being undertaken since the introduction of the new Act.
He said the management of the Trust had put in place a number of measures, including prudent expenditure patterns, to reduce waste in the system.
Dr Odoom said the Trust had also taken steps to ensure that investments made by the Trust were viable and profitable to ensure that the returns were enough to sustain the scheme.
“We want to ensure that every contributor to the scheme enjoys a better pension so we have put measures in place to offload our interests from investments that are not yielding the right returns,” he said.
Source: Daily Graphic