Feature Article of Sunday, 14 October 2012
Columnist: Cudjoe, Franklin
IN THE MANAGEMENT OF THE TPF
Following the implementation of the National Pensions Act, 2008 (Act 766), SSNIT was mandated to collect contributions for Tier 2 on behalf of the NPRA, starting January 2010. The norm established was that payments for Tier 2 went along with Tier 1 but in separate cheques.
1. The 2010 SSNIT annual report shows that SSNIT collected GH¢576.8m in respect of the 13.5% Tier1 Contributions.
2. At the rate of 5%, we estimate that a total of GH¢213.6m was collected by SSNIT in respect of the Tier 2.
3. Since contributions are normally sent out monthly, we divided the 2010 annual Tier 2 contributions by 12 to arrive at GH¢17.8m monthly contributions.
1. Mr. Sam P. Yarley, on Wednesday, 10th October, 2012 confirmed on Radio Gold that a total amount of GH¢439m had been collected with accumulated interest of GH¢25m earned.
Our Investment Assumptions:
1. We assume that contributions are being invested at constant interest rate of 9.7% (2010 prevailing rate), though interest rate on 91-day bill has risen to 23% presently.
2. We are also assuming that contributions have remained unchanged from 2010, though it is expected to be more.
3. We assume that contributions have been collected for investment for 32 months, i.e. from January 2010 to August, 2012.
Using the above assumptions with the future value formula (FV), we estimated the value of the Temporary Pension Fund run by the NPRA.
1. Our calculations show that a total amount of GH¢587.5m has been collected from 2010 to date, as opposed to GH¢439m suggested by Mr. Sam P. Yarley.
2. Interest accrued to the investments is estimated at ¢59.7m, contrary to the GH¢25m given by Mr. Sam P. Yarley.
3. The TPF per our calculations will be worth GH¢647m instead of the GH¢464m NPRA claims it has.
4. Using simple return on investment (ROI), our calculations shows that a return on investment of 10.16% should have been achieved. The NPRA achieved 5.69%
With these rather modest assumptions, we have made startling observations that point to serious financial impropriety at the NPRA. You will all agree that our assumptions have been rather modest both in our use of constant contributions at 2010 levels and constant interest rates at 2010 levels, though interest rates today hover around 23%. Please note the following:
1. Our figures indicates that the NPRA should have received GH¢208m more in contributions. Why is this less? Is this in arrears? Who are the debtors?
2. The NPRA should have received GH¢34.4m more in interest from the investments of funds even at the lowest interest rate in the past 3 years (9.7% in 2010). What did the NPRA invest in to achieve this abysmal return?
1. Pension Schemes should be licensed immediately for the licensed Trustees to takeover immediately.
2. The NPRA should quickly publish a statement of affairs of the TPF detailing, full facts on monies collected, investments made, expenses incurred, on a month on month basis.
3. The Government should undertake a forensic audit into the financial management of the NPRA as regards the handling of the TPF. Any misdeeds should be severely punished. Monies unaccounted should be chargeable to the Board members.