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Feature Article of Thursday, 4 October 2012

Columnist: IMANI Center

Ghana's New Pension Scheme hangs dangerously

on one man's shoulder and his regulatory office.

On Monday, October 1, 2012, the Graphic Business reported, that the new Pensions Scheme is under threat, not because of a viral attack, but purely due to administrative inertia. Perhaps, it was coincidental that on the same day Graphic Business Published its story and editorial, Pensioners across the country were lamenting the dwindling power their miserly monthly payments could muster in the face of prevailing economic conditions and called on politicians to speak to the issue of Pensions, at least in this electoral After three years of reforming Pensions in Ghana, the National Pensions Regulatory Authority (NPRA), itself a creation of the reforms is yet to fulfil its major mandate of licensing occupational pension schemes that are ready to work directly with contributors.

Graphic Business reports that in September 2009, the Board of the National Pensions Regulatory Authority (NPRA) was set up to oversee the implementation of the National Pensions Act, 2008 (Act 766). The Act seeks to create a unified pension system under a three tiered pension structure, with SSNIT as the operator of the First Tier, and Approved Trustees (Corporate Trustees) as operators of the mandatory Tier 2 and Voluntary Tier 3 schemes. To begin the implementation, the NPRA set up a Temporary Pension Fund (TPF) in January 2010 to provisionally administer Tier 2 contributions pending the licensing of Trustees. Employers have, since January 2010, been remitting 5% (Tier 2 contributions) of their employees salaries to the TPF.

An in-depth investigation reveals that the administrative sludge is purely the making of the Board Chairman of the NPRA under whose unclear tenure three Acting CEOs had had to resign within a year and a half.

From outright usurpation of powers to direct threats of removal, all Acting CEOs have been or nearly cowed into slavish submission except those who escaped. And there are allegations of colossal financial impropriety (for instance, per the account of the last Acting CEO, as a non-executive Chairman, he signs cheques and makes unapproved withdrawals) from the money that hard working pensioners contribute. The administrative behemoth, albeit retrogressive, was aptly described by the last Acting CEO who resigned, thus, Governance is a huge challenge for the National Pensions Regulatory Authority and the earlier the issue is addressed the better it would help the Authority to deliver on its mandate. Perhaps if there is one major undeserving feat the Board has chalked, it is that the board chairman has licensed third party Service Providers in March 2012 to handle data management as part of the transitional arrangement in the setting up of The Temporary Pension Fund, which was to receive the 5% second tiered contributions. That in itself is nothing, compared with what the 5% contributions should have been used for in the last three years for which no information exists.

With no clear guidelines as to which ministry it must report to, it is in the NPRAs interest to be resourceful by releasing contributors funds that must duly go to private and state schemes now so ordinary back-breaking workers can determine how to invest their money for old age. It is because people were not happy with the SSNIT Scheme that the new pension reforms came to be. Otherwise these are the possible scenarios:

1. Workers who retire anytime now risk not getting their lump sum benefits. In fact people who have retired since 2011 but have made the 5% Tier 2 contributions still cannot access their lump sum benefits based on the contributions made since January 2010. This is a potential crisis.

2. There may be no accountability as to what the contributions have used for. The longer the status quo remains, the direr the accountability question becomes. In the words of the Acting CEO, It is important that serious efforts are made to reconcile contributors data to ensure that cash and investment holdings that are under the custody of NPRA in aggregate is equal to the total liability due to the contributors before statements are sent out to them. The caution is that Defined Contribution is fully funded and at any point in time the contributors statement and the funds should be the same.

3. Since the NPRA is not a Fund Manager, they have neither the resources nor the skill to be investing the contributions they have received since January 2010, in order to maximize returns for workers contributions. The Ghanaian worker ultimately suffers.

4. Tax incentives on the Voluntary Tier 3 cannot be enjoyed because the NPRA has not licensed Schemes for Scheme Members to enjoy those tax relieves. The tax relief granted by the pension reform is the main incentive that encourages people to participate in the Voluntary Tier 3. Participating in Voluntary Tier 3 enhances the retirement incomes of workers.

5. From an economic perspective, very important source of revenue needed for national and private sector development is still being held by the NPRA because all they can do is to invest the funds in Government treasures. This is assuming that the funds have been invested at all. Whats the proof that the funds are available anyway? Potentially, income from pension contributions is more sustainable than even oil. For as long as people continue to work, there will continue to be pension contributions whereas oil reserves can actually run out. Scheme trustees can invest funds in the private sector, real estate, listed equities (to develop our stock market), government treasuries (to sponsor government projects), etc.

In the light of the above, we demand the following to take place with immediate effect: 1. The NPRA should immediately, without delay, be asked to produce an Investment report showing how much monies have been received, what it has been invested in return on investment over the period.

2. The NPRA should be ordered to license Tiers 2 and 3 Schemes immediately and announce a cut-off date for taking Tier 2 contributions into the Temporary Pension Fund by employers. That cut-off should be contributions for September 2012  assuming that some companies have already made September contributions already. This is to allow for uniformity. 3. Employers be informed to make their mandatory Tier 2 and voluntary Tier 3 contributions into schemes of their choice starting from contributions for October 2012.

4. The Board Chairman (or the entire Board) me made to step aside while a forensic audit is undertaken on the stewardship of the NPRA over the Temporary Pension Fund and the investment activities of the NPRA with respect to same.

Courtesy, IMANI Center for Policy & Education and www.AfricanLiberty.org

Email : info@imanighana.com Web : www.imanighana.com

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