Pension funds good source for projects - Yalley
Pension funds can provide alternative sources of revenue to finance government’s infrastructure projects, the Chief Executive Officer of the National Pensions Regulatory Authority (NPRA), Mr Sam Pee Yalley, has said.
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He said between 2010 and 2012 alone, the NPRA accumulated GH¢481,760,926.86 from the five per cent contributions of workers in the second tier of the pension scheme.
In an interview with the Daily Graphic, Mr Yalley said the amount accumulated was substantial to finance major projects.
He said the successful commencement of the implementation of the new pension reforms would make available long-term investible funds that could be used to solve many infrastructural challenges.
According to the World Bank and other multilateral and bilateral donors, Ghana is bound to receive less donor funding in terms of loans and grants from the international community to bridge its gaping infrastructure deficits.
It is expected that the pension funds will help the government to drastically reduce its over-reliance on foreign donors to reduce the country’s external debt stock.
The use of pension fund for development projects can help prevent borrowing more from local banks, a practice which affects the rate of treasury bill.
However, Mr Yalley said that the projects to be embarked on by the government with pension funds should be those that would yield positive interests to take care of contributors who might be due for retirement.
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The NPRA CEO said for instance that major roads could be built with pension funds and tolled for the government to recoup the investment and to pay back on time.
“If the government is able to do so contributors will have no problems when they are due to take their pensions because the government would have paid back what it took at much more reasonable interest rates than resorting to commercial loans,” he said.
The new Pensions Act of 2008 (Act 766) was promulgated on December 12, 2008, followed by the accompanying Regulations (L.I. 1990) which was passed in 2011.
This gave birth to the implementation of three tier pension scheme of which the first two are compulsory, while the third tier is voluntary.
The first tier is managed by the Social Security and National Insurance Trust (SSNIT) as was the case before the reforms.
The second tier fully funded and privately managed is designed primarily to give contributors a lump sum benefit to replace what was previously available under the SSNIT Scheme or the Cap 30 Scheme
The lump sum benefits are dependent on the level of contributions, the investment returns and administrative expenses incurred in the management of the scheme.
The current contribution rate which is five per cent of salary is operated under trust by trustees approved and licensed by the NPRA.
The NPRA, as part of its strides, has developed and approved a total of 13 guidelines for the operations of the new scheme.
It has also been able to successfully license and register service providers; 15 corporate trustees have been licensed; and 36 pension fund managers and 15 pension fund custodians registered.
With the take-off of the pension reforms, the challenge the service providers will face is to find investible sources within the law to be able to make the necessary returns to take care of pensioners on retirement.
According to Mr Yalley, everything is on course to ensure that the service providers go strictly according to law as far as investments are concerned to ensure that no funds are dissipated to create challenges for the scheme.
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“We are closely monitoring their activities and we will not hesitate to apply sanctions when due to protect the scheme but we are happy so far and we hope for the best for the scheme,” he added.
Story: Charles Benoni Okine