Closure of the Temporary Pension Fund Accounts (TPFA)

Outlines and Introduction

In January, 2010 Ghana was ushered into a new era of pensions administration with the implementation of the 3-Tier Pension Scheme. The 3-Tier Pension Scheme was established by the National Pensions Act, 2008 (Act 766) which was passed in 2008. The Act also established the Pensions Authority charged with the mandate of overseeing the implementation of this new law.

As part of the transitional arrangements for the smooth take off of the 3-Tier Pension Scheme in 2010 and in accordance with section 218 of Act 766 which provides that “from the commencement of this Act and before the licensing or registration of trustees, pension fund managers and custodians, every employer to whom this Act applies shall open a temporary Occupational Pension Fund Account with the Bank of Ghana”, this account was expected to receive the 2nd Tier mandatory contributions of workers temporarily pending the licensing and registration of service providers.

At the commencement of Act 766, it was appreciated by the key stakeholders that direct payment of 2nd Tier contributions to the Bank of Ghana was going to pose operational and administrative challenges for the Bank of Ghana and much inconvenience to employers. This is because employers will have to look for Bank of Ghana and make payment of their workers contributions. These challenges could be a good breeding ground for some employers to default in payment of 2nd Tier contributions of their workers, since the Bank of Ghana is not physically accessible in all parts of Ghana.

In view of these challenges, it was agreed by stakeholders including the Presidency, Ministry of Employment and Labour Relation, NPRA, Organised Labour, Employers Association and SSNIT that,

  • Temporary Pension Fund Accounts (TPFA) should be opened at the Bank of Ghana as a collection account for the payment of 2nd Tier mandatory contributions.
  • SSNIT should use its branch offices across the country to collect and remit the 5%, 2nd Tier mandatory contributions into the TPFA at the Bank of Ghana.
  • That the NPRA should invest the funds in the TPFA in Treasury Bills till the funds are transferred to the various custodian account of the registered schemes.

Opening of the TPFA  

Two Temporary Pension Fund Accounts (TPFA 1 and TPFA 2) were accordingly opened by the Authority and started receiving contribution from 1st January, 2010. TPFA 1 received contributions from the private sector and government sub-vented institutions. TPFA 2 received contributions from public sector institutions which draws their salaries from Controller and Accountant Generals’ Department.  .

TPFA 3 was latter opened to receive contributions from private sector and sub-vented organizations when auditing of TPFA 1 was commissioned to pave way for the transfer of the accrued funds in TPFA 1. All these contributions were invested in the Treasury Bills.

In 2012, service providers which include Trustees, Pension Fund Managers and Pension Fund Custodians were licensed and registered and given the approval in November 2012 to receive contributions directly from employers and contributors. This marked the era of full private sector participation in the management of pension schemes in Ghana. Currently there are 30 Corporate Trustees, 77 Pension Fund Managers and 17 Pension Fund Custodians in operation.

With the approval given, employers were expected to ensure the registration of the 2nd Tier mandatory occupational pension schemes for their workers and stop paying 2nd Tier contributions into the TPFA.

Employers and employees were at liberty to either register an Employers Sponsored Scheme or join a registered Master Trust Scheme of any licensed Corporate Trustee of their choice for the management of their 2nd Tier Occupational Pension Scheme. As at June 2018, the Authority has registered 50 Master Trust Occupational Pension Schemes, 87 Employer Sponsored Occupational Pension Schemes.

In 2014 the Authority began the transfer of the funds in the TPFA on behalf of their workers. This was after the funds had been thoroughly audited.

Transfers are made for only active workers meaning that at the time of the transfer, the person must be working and belong to the registered scheme. Again transfers are only made at the request of the trustees.

The Authority started the transfers in 2014 and as at November 2017, the Authority has transferred a total amount of GHS 555,966,192.35. These transfers were made on behalf 258,422 employees. The amount transferred between this periods represents the total value of contributions in the TPFA 1 from January 2010 to December 2013.

As at the end of December, 2017, the Authority transferred GH¢3.1 billion being  the accrued contributions of 2nd Tier funds of public sector workers who draw their salaries from the Controller and Accountant Generals’ Department payroll which was outstanding over seven years in the Temporary Pension Fund Accounts (TPFA) into the custodial accounts of the registered four Public Sector Schemes; namely Hedge Master Trust Scheme, GES Occupational Pension Scheme, Health Services Workers’ Occupational Pension Scheme and Judicial Service Occupational Pension and other public sector workers who do not belong to any of the major four schemes.

The transfer was in the form of cash, securities or investments.  However, there is further work to be done to resolve some outstanding issues concerning data to finally complete the process.

Current status

The Ministry of Employment and Labour Relations (MELR) and the Authority in consultation with stakeholders have appointed General Trust Company (GenTrust) Limited, a licensed Corporate Trustee to register Sankofa Master Trust Scheme to take over the management of the Temporary Pension Fund Accounts (TPFA) 1 and TPFA 3 for the private sector.

The Authority as at June, 2018 has completed the transfer of funds in the TPFA 1 to the Sankofa Master Trust Scheme for the period January 2010 to December 2013.

The Authority is also in the process of transferring the TPFA 3 funds for the period January 2014 to date to Sankofa Scheme.

Going forward General Trust Ltd. will therefore pay Tier 2 benefits to all contributors whose funds are in the TPFA 1 and 3. General Trust Ltd will also receive and process porting requests from other registered Master Trust Schemes or Employer Sponsored Schemes upon request as was done by the Authority.

General Trust has also registered Public Sector Workers (PSW) Master Scheme to manage contributions of sub-vented organizations which do not draw their salaries from Controller and Accountant Generals’ Department.

Therefore technically, there is no more TPFA as schemes have been set up to manage those accrued funds.

Frank Anderson