A GNA feature by Anwomea Ackah Blay

Accra, Sept 28, GNA - The nine-member Presidential Commission on Pensions under the Chairmanship of Mr Thomas Ango Bediako, onetime General Secretary of the Ghana National Association of Teachers (GNAT) and the All Africa Association of Teachers Organisation (AAATO), has presented its recommendations at a news conference in Accra. This findings made public is of paramount interest and dear to the heart of almost every Ghanaian because it dealt mainly with the public sector since Government is the largest employer and everybody either directly or indirectly is connected to somebody affected by the recommendations.

The issue of pension has been a thorny one because the fortunes of people, who go on pension, dwindle drastically making most of them dependent.

It is a pathetic sight to see such Senior Citizens at the banks, every month ending trooping in to receive their paltry, pension earnings, which could hardly meet their needs. The fact that every worker would go on pension one day explains why organised labour had been in the forefront of the struggle for the payment of a living pension.

Addressing the news conference, Mr Bediako outlined a three-tier pension structure, comprising two mandatory schemes and one voluntary scheme to ensure retirement income security in the 160-page interim report presented to President John Agyekum Kufuor last June. Outdooring the report in Accra, the Commission said if the new proposals were accepted in principle, pensions would improve significantly and recommended an independent Commission to regulate pensions.

The first tier is a restructured Social Security and National Insurance Trust (SSNIT) Scheme to be retained as a mandatory State scheme to pay monthly and other benefits, with the exception of the 25 per cent gratuity lump sum.

"It will be a defined benefit scheme, benefiting from a portion of contributions from both the workers' five per cent and the employers' 12.5 per cent.

The second was a mandatory, privately managed Occupational Scheme with defined contribution paying mainly lump sum benefits with the minimum total contribution being legislated, but not below five per cent.

The third tier was a voluntary, privately managed personal pension scheme offering attractive tax incentives, the Commission said, and suggested tax incentives and a regulatory framework to enable the employer and employee to fulfil the roles expected of them, which had been effectively captured by the Long-Term-Savings Act, "Act 679 of 2004".

The Chairman stated that the Commission looked at several issues including types of pension structures and criteria for public sector pensions framework, existing public sector pension schemes, financing, management and administration of public sector schemes, occupational pension in the private sector and pension arrangements in some selected countries.

Ghana currently operated two separate public-sector pensions, the SSNIT and CAP 30, he said, and stated that its preliminary calculations indicated that currently at age 50 years and above and with five per cent contribution, the number of years left for active service may not allow enough funds to be accumulated under the second tier scheme to match the lump sum expected under CAP 30.

The Commission recognised the fact that getting funds from State coffers to pay pensions and other benefits to CAP 30 beneficiaries, most of whom do not make any contribution, was fraught with difficulties and posed a danger to the sustainability of the scheme.

The Commission recommended that both the SSNIT and CAP 30 schemes implement an active policy on pension scheme communications, involving the provision of user-friendly scheme documentation and annual benefit statements.

The Commission stressed that the Government should take a serious note of the impact of the 2.5 per cent National Health Insurance Scheme Levy on the Social Security and National Insurance Trust (SSNIT) Scheme It said that it gathered from a study conducted by SSNIT to assess the financial impact of the 2.5 per cent contribution to the NHIS that it would have an adverse impact on the Scheme as currently structured. "Be as it may, the SSNIT Scheme has the inherent capacity to remain viable and sustainable," the Commission said, but added that several challenges must be confronted to remove the threats to its sustainability.

These include high administrative costs, poor returns on investments, the burden of the students' loan scheme, the 2.5 per cent NHIS contribution and political interference in the management of the scheme.

From the recommendations, the Social Security and National Insurance Trust (SSNIT) should be restructured with Government's support and participation of stakeholders.

It recommended the review of the SSNIT Law to reduce the "overbearing" government presence on the Board and the de-facto control of the Fund by government and redefine the responsibilities of the Board to reflect best governance practices.

The Commission noted that over the years, the SSNIT scheme had experienced serious credibility problems as a result of the low lump sum benefits paid, poor management of the funds and a faulty institutional design, which enabled the government to have a larger presence and control over the Governing board and to interfere in the management of the Funds to the detriment of contributors and a high defaulting rate. On ownership, the Commission said it discerned divergent views over the ownership and control of SSNIT and funds, but supported the argument that the government had no defined legal role after setting up the Trust and appointing trustees.

Mr Bediako said evidence available to the Commission pointed to inadequate pensions, which was in principle as a result of low salaries. The Commission stated that the approach to be adopted for improving coverage of the informal sector should be one akin to a voluntary operated one in Senegal and thus recommended it for evaluation and further study, citing Section 6(a) of Article 37 of the 1992 Constitution, which enjoins the State to ensure that contributory schemes are instituted and maintained that will guarantee economic security for self-employed and other citizens of Ghana.

For the implementation of a successful Pension schemes the SSNIT should be protected from governmental interference in its activities and the Board made up of representatives of the government, the Trades Union Congress, the Civil Servants Association and employers, insulated from government manipulation.

Some problems confronting SSNIT, which must be removed to make it sustainable, also include high administrative costs; poor returns on its investments; the burden of the Students Loan scheme; the 2.5 per cent health insurance contribution and the political interference in the management of the scheme.

It must be pointed out that the sustainability of any Pension scheme is dependant on the availability of funds and serious efforts must be made to ensure that money was always readily available to pay reasonably decent sums to pensioners to avoid a situation where they would have to depend on charity.

This calls for a reliable and profitable investment programmes that would ensure steady and good returns devoid of fluctuations to promote the long term planning of the funds to honour the payment of pensions.

One area that readily comes to mind is investment in government bonds and treasury bills but this would always be influenced by bank rates, the levels of which cannot be guaranteed.

To ensure the availability of enough funds at any given time, which would be sufficient enough to ensure the payment of pensions, the board or commission proposed by the Presidential Commission to mange pensions in the country should look for areas of investment of pensions funds that would rack in enough money to honour its obligation.

Such an investment policy apart from ensuring steady and enough returns should also be geared towards job creation to offer jobs to the teaming unemployed in the country to have incomes enough to enable them to live decent lives and contribute to the funds for pensions.

A special bond specifically for pension could be floated for investment in the provision of physical infrastructure such as roads and bridges instead of roaming outside for capital for such national development efforts.

The funds could be invested in the infrastructure sector on Build Operate and Transfer popularly referred to as BOT projects such as the construction of roads and bridges for users to pay tolls.

For the sustainability of a decent pension scheme, there is the need for imaginative, efficient and dynamic mangers, who with foresight could direct such funds into projects with the potential of ensuring steady and high yielding returns. 28 Sept. 05