In a bid to make retirement more meaningful for workers by paying higher pensions, regulator of pensions, the National Pensions Regulatory Authority (NPRA) says it is pushing for the consolidation of all allowances and salaries into one.
The NPRA maintained that “when it comes to the amendment of the law, as part of pension reforms, we want to consolidate salaries as the basis for contributing to the various pension schemes.”
One of the effects the Authority had found out about the National Pensions Act was the definition of salary as a basis of contributing to pension schemes.
“We have found that many people receive allowances that are usually even bigger than their own basic salaries but the law does not encourage them to contribute based on their basic salaries being added onto their allowances,” Director for Planning, Research, Monitoring and Evaluation at the NPRA, Mr Ernest Amartey Vondee revealed.
He was addressing a stakeholder forum organised by Old Mutual Ghana on the back of the company’s latest ‘Obra Pa retirement salary’ product.
The ‘Obra Pa (which means ‘good life’) Retirement Salary’ is designed to help retirees experience all the good things they want in retirement. It is set to help them enjoy a customized plan tailored towards their unique needs while helping protect what matters most to them in retirement.
According to Mr Vondee, the pensions law had restricted contributions to the basic salary, adding “for that reason, it makes the basic salary very low and consequently low benefits coming from the state scheme.”
As at 2019, out of an active contributor membership of 1.6million 25 per cent of this number contribute on salaries of GH¢400 or less while about 50 per cent contribute on basic salaries of less than GH¢1000. 71 per cent of the contributors do so on salaries of less than GH¢1800. Only 4 per cent contribute on salaries of GH¢5,000 and above. These are equally reflected in the low pensions that people receive.
As part of the pensions reforms, there are efforts to diversify the pensions income base. The pension law makes provision for individuals to make contributions with very handsome tax incentives of 16½ per cent into personal pension schemes.
“You can contribute heavily into personal pension schemes to be able to enhance your retirement income security,” Mr Vondee advised.
The NPRA had since its inception emphasised on educating Ghanaians on pensions and issues that have to do with retirement. More often than not, the emphasis has been on pension planning but retirement planning is a much bigger subject.
He explained that “retirement planning come with healthcare planning, it comes with accommodation issues, it comes with leisure and effectively you can use your retirement time to promote your health.”
The NPRA had been looking at retirement planning and beginning from 2022 to 2027 the Authority will be pursuing retirement planning more vigorously.
According to Mr Vondee, “we ourselves have observed some deficiencies in terms of the kinds of benefits that workers get when they retire from active service and we think that the basic reason why the regulator exists is to enhance retirement income security.”
Data from the Social Security and National Insurance Trust (SSNIT), out of 233, 670 people are on the pensions payroll as at July 2021, there are 1,669 people on the minimum pension of GH¢300 a month.
Those who earn more than GH¢300 but less than GH¢500 a month total 26,571. Cumulatively, this means 28, 240 people receive pensions less than GH¢500 a month, representing 11.37per cent of pensioners.
Those who receive pensions from GH¢500 to GH¢1000 a month number 124, 655. Cumulatively we have 152, 895 earning less than GH¢1000 representing 53.3 per cent of pensioners who earn monthly pensions of less than GH¢1000.
What we need to do is to be able to enhance what people receive so far as their monthly pensions are concerned.
New insurance Act protects pensioners
Speaking at the same forum , the Deputy Commissioner of Insurance at the National Insurance Commission (NIC), Mr Michael Andoh, said the main objective of the NIC was to protect policy holders.
“Talking about pensions, you need to be somebody who has an insurance product to make the regulator relevant to you, because we are there to protect insurance policy holders,” he stated
He assured prospective investors into annuity products that the NIC had built extra walls around the annuity business.
“To be able to offer an annuity product, there are additional capital and insolvency requirements companies must meet, in addition to what the other companies are meeting,” he added.
Education plan for annuities in the offing
What the Commission had done was to create a multi-stakeholder forum which is formulating an education plan. We have representatives from the NPRA, the banks, insurance companies and other stakeholders.
Source: Isaac AIDOO || The Finder, ACCRA