Taking our pension more seriously

Issues about pension elicit a lot of emotion, passion and discussion, simply because life during retirement can be quite challenging.

Contributors to the Social Security and National Insurance Trust (SSNIT) aspire to have a comfortable retirement and enjoy decent pension benefits, but that is not always the case.

A recent disclosure by the pensions regulator, the National Pensions Regulatory Authority (NPRA), that more than half, that is, 53 per cent of the 233,670 pensioners on SSNIT payroll currently receive less than GH¢1,000 per month as their monthly benefit served as a wake-up call to many contributors to the scheme. The pension regulator had also indicated that about 1,669 people were on low pensions of less than GH¢300 per month.

The Daily Graphic is very concerned about the issue because retirement is inevitable and every worker will definitely reach the mandatory retirement age of 60 one day or another. Consequently, the matter of low pension benefits cannot be swept under the carpet, while we pretend the Pensions Act has cured all the ills of pension administration in the country.

This is where we find very important and useful the proposal by the Director-General of SSNIT, Dr John Ofori-Tenkorang, to labour to critically consider pensions when negotiating for wages and other benefits with the government and other employers.

He also stressed the need for that conversation to also include the need to consolidate salaries to enable the deduction of the percentage set aside for one’s pension to reflect what they earned every month.

Speaking to the Daily Graphic last weekend, Dr Ofori-Tenkorang explained that the situation of low pensions had come about basically because of the amounts that pensioners contributed to the scheme during their time in employment. (SEE OUR FRONT PAGE LEAD STORY OF MONDAY, AUGUST 30).

A bit of context will suffice.

Unlike the situation in many sub-Saharan countries, Ghana’s public and private sector pension systems are integrated, with every citizen able to access a modern, three-tier structure which is overseen by the NPRA, under the management of SSNIT.

The first tier is a compulsory pay-as-you-go scheme contributed to by formal sector workers. The second is also employment- and earnings-related, but contributed to by both employers and employees, either through monthly payments or a lump sum.

Unlike the first tier, the second and the third tiers are administered by private retirement schemes. Participation at the third level is entirely voluntary and based on tax-deductible, individual contributions. Any benefits received are fully funded and based on a determined contribution.

The expected outcome of this three-tier pensions approach is to ensure that the financial security of the contributor is assured.

Currently, the monthly remuneration package of a worker includes basic salary, allowances and non-cash benefits. However, the pensionable salary on which deductions are made for social security and two-tier contributions is limited to only the basic salary.

And because the pensionable salary is only limited to the basic salary, the logical consequence is that the lower one’s basic salary, the smaller the benefit, which will definitely affect the pensioner’s financial security. Low contributions will definitely lead to low pensions.

We find Dr Ofori-Tenkorang’s advice very necessary and something that the various workers’ unions must take up in earnest in their negotiations with the government and other employers.

While the Daily Graphic acknowledges the fact that the unions have been the greatest advocates of workers’ rights and welfare, a lot more needs to be done when it comes to educating their members on retirement planning and pension issues.

It is heart-rending, sometimes, to find that some retirees live in abject poverty because of the lack of proper retirement planning and inadequate pension.

This is the time for all of us, earning incomes, during our working life to consider pension much more seriously, so as to guarantee a better life during our old age when we can no longer actively work.