A recent study by the external Actuaries on the Social Security and National Insurance Trust (SSNIT) scheme have recommended a 19.2 percent contribution rate to replace the current 11 percent rate being implemented which is inadequate for pension contributors according to actuarial studies.
The move is aimed at instituting effective policies to enhance the purchasing power of pensioners in the country as the benefits of about a quarter of them is estimated to be inadequate. This would in turn improve workers’ life expectancy after retirement as well as ensure the sustainability of the pension funds and how efficient it should be applied across board.
This is part of a number of amendments currently being considered for implementation in the National Pension Act, 2008 (Act 766) by sector Administrators – National Pension Regulatory Authority (NPRA) and SSNIT in consultation with the Trades Union Congress (TUC).
This has become necessary because some gaps – with regards to the prevailing law governing the operations of the pension scheme have been identified by the Administrators and TUC during recent engagements, hence the need to institute measures to curtail them. Discussions between the actors have already begun in earnest.
According to the TUC, it has identified some weaknesses in the SSNIT scheme with regards to inadequate pension benefits and that must be addressed, stressing that the weaknesses in the system could be attributed to inherent flaws in the legislation governing the social policy to recognize the need for the vulnerable on the scheme.
Currently, there are over 200,000 pensioners under the SSNIT scheme, and about a quarter of them receive monthly pension payments of about Gh¢300.00 a month. This it noted is woefully inadequate.
Another item that is being considered for implementation in the new pension regime is having to look at whether it is appropriate to pay pensions based on only three years or best 36 months of contributions as in other jurisdictions, such as the United Kingdom, the lifetime average of the contributor is what is used to calculate the benefits.
Speaking exclusively to the Goldstreet Business on the importance of implementing the lifetime average of the contributor instead of the best 36 working months, the Director General of SSNIT, Dr. John Ofori-Tenkorang said some people are taking undue advantage of the scheme and that there is the need to take effective measures to sustain it.
“The use of the best three years is subject to abuse where some people towards the end of their working life, especially those in the private sector try to inflate certain salaries. Measures are in place to prevent people from taking advantage of this aspect of the scheme”, Dr. Ofori-Tenkorang noted.
Though the Constitution provides that the mandatory retirement age should be 60, talks are also underway to decide on the exact year people must retire at as several studies have pointed out that people do not die early as has been perceived. Indeed medical advances and healthy living regimes have extended both the average life expectancy and the average productive life of people all around the world.
Already, the TUC has made a case at the National Tripartite Committee for a review of the law to protect the interest and safety of workers in the country stressing that the current labour law does not provide adequate protection to workers in terms of job security, income security, health and safety.
By Dundas Whigham