Compute pensions on salaries, allowances - Stakeholders

Stakeholders in the pension industry have called for pensions to be calculated on basic salaries, as well as other forms of remuneration.

They blamed low pensions in the country on the poor basic salaries workers received while in active service.

The stakeholders, comprising representatives from the National Pensions Regulatory Authority (NPRA), the Social Security and National Insurance Trust (SSNIT), the Trades Union Congress (TUC) and experts in the sector, were contributing to discussions at a national dialogue on pensions in Accra yesterday.  

They made reference to the current situation where pensions did not include allowances and other forms of remuneration, leaving pensioners with very low pensions
Including other forms of remuneration, they explained, would ensure that workers contributed substantial amounts in pensions to enable them to receive handsome pensions on retirement.

The dialogue was organised by the fiscal policy think tank, the Institute for Fiscal Studies (IFS).

Why pensions are low

Setting the tone for the discussion, the Director General of SSNIT, Dr John Ofori-Tenkorang, said the trust was aware of growing concerns over the low pensions paid to retirees.
Given that SSNIT was virtually the face of pensions in the country, he said, whenever the issue of low pensions was raised, “the trust had been put in sharp focus. My response to that is simple: you get what you put in”.

 “The pensions paid are a reflection of the salaries on which contributions are paid,” he added.

Using statistics to buttress his point, he said data from the trust showed that as of February this year, approximately 25 per cent of all workers in the country under the trust’s scheme contributed on salaries of GH¢400 and below.

Should those workers retire on those salaries, he said, they would receive GH¢240 or low as monthly pension.

“The next 25 per cent of workers are contributing on salaries between GH¢400 and GH¢1,000 per month. That is the data we see; we do not see the allowances, we do not see the table tops, if there are any,” he said.

Dr Ofori-Tenkorang said the data also showed that only four per cent of workers were making their pension contributions on salaries of GH¢5,000 and above.

“And so when we look at our pension payroll, only one per cent of our pensioners earn more than GH¢1,000 a month,” he said.

Consolidate salaries and allowances

The SSNIT boss said it was, therefore, deceptive that people often tended to chastise SSNIT whenever the issue of low pensions came up for discussions.

“This shows that pension pay is directly related to the salaries of workers. We must, therefore, shift the conversation from low pensions to improved salaries on which contributions are paid.

“One sure way to improve pensions, therefore, is to consider consolidating salaries and allowances,” he said.

Redefine pensions

An expert in pensions, Mr Daniel Aidoo Mensah, said data showed that about 60 per cent of workers’ remuneration was made up of allowances and other earnings on which pension contributions were not paid.

“So there is the need to redefine pensionable salaries to include allowances and other things,” he said.

The Director of Research and Planning at the NPRA, Mr Ernest Amartey Vondee, and the Secretary General of the TUC, Dr Yaw Baah, agreed that pensionable salaries needed to be redefined to help improve the pensions of retirees.

Mr Vondee, however, observed that such a decision needed to be preceded by proper dialogue involving all stakeholders.

He explained that adding allowances to basic salaries would increase the compensation cost of employees and also reduce their take home pay, hence the need for consensus.