SSNIT to maintain confidence in operation of informal sector fund

Accra, Jan. 17, GNA – The Social Security and National Insurance Trust (SSNIT) has assured Ghanaians that it would endeavour to maintain confidence in the operation of the SSNIT Informal Sector Fund (SISF), to safeguard funds of the informal sector contributors.

The SSNIT said, as the sole shareholder, it owed contributors of the SISF scheme the responsibility to ensure the integrity and safety of their savings and pension expectations.

These were contained in a statement issued by SSNIT, copied to the Ghana Mews Agency (GNA) in Accra on Monday.

It was in reaction to allegation made recently against SSNIT by the Alliance for Accountable Governance, a pro-democracy civil society group, in the media, under the headline: "Mismanagement At SSNIT." The statement explained that SISF was established in February 2008 as a company limited by guarantee with SSNIT as the sole shareholder.

It said: “SISF is mandated to run an informal sector pension scheme and has an Executive Council that directs its affairs and reports to SSNIT.”

The statement said the scheme was one of the major initiatives introduced by SSNIT to expand social security to cover the vast majority of the working population of the informal sector in Ghana, who would have no other source of income in old age or during their invalidity.

It said the vision of SISF was to become the market leader and pioneer in the provision of social protection schemes for workers in the informal sector, through innovative product design, excellent customer care, prudent investment, effective administrative and to pay close attention to sustainability. The statement said all these arrangements and strategies were mooted under PNDC Law 247, when SSNIT was the only administrator of the nation’s pension scheme. It said: “With the operationalisation of the National Pensions Act 2008, (Act 766) in 2010, the pension fund arrangements and management of the various contributor schemes have changed, together with the status of the players. For instance, Act 766 mandates SSNIT to manage only the First Tier (Tier 1) and accordingly receives only 11 per cent of the 18.5 per cent of contributions as compared to receiving the 17.5 per cent of contributions under PNDC Law 247. Comparably, the operations of SISF come under the voluntary Third Tier (Tier III) with different rules, arrangements and management requirements.” The statement said as a pioneering effort by SSNIT in seeding the mobilisation of savings and structuring a pension fund for the informal sector, SSNIT has so far provided start-up support of GHC7.2 million to the SISF. It said presently, however, the question of fund administrative cost and operational sustainability has become a critical matter.

The statement explained that this was because a fund manager needed to cover operational costs from a fixed fee and not from continuous injection of external non-contributor funds.

It said: “SISF as currently operated, is unable to cover its administrative costs, despite the claimed registration of 90,000 contributors with a fund size of GHC23 million.”

The statement said additionally, the mandatory Tier I contributors that SSNIT now manages could be used to support a voluntary Tier III Fund by way of “budgetary support”.

It said the already advanced GHC7.2 million of Tier I funds were in reality a loan advanced to the SISF, which would need to be recovered if the operations of SISF were to become independently sustainable.

The statement said: “In view of the unfavourable trend, SSNIT as the sole shareholder of the SISF, has considered various approaches to sustain the informal sector fund, including discussion of restructuring options with the Executive Council of the SISF and in line with its fiduciary responsibilities. Indeed, as recently as the last quarter of 2011, SSNIT intervened again with funding to cover salaries of the SISF staff for November 2011 through January 2012. A situation that cannot continue if the fund is to be independent and sustainable and not a drain on SSNIT’s discharge of its Tier I responsibilities.”

It said SSNIT could not look on these developments without concern, and as part of interventions initiated last year, the SSNIT Board of Trustees gave the Executive Council of SISF up to January 16, 2012, to submit options or interventions that would ensure the fund’s independent sustainability as a self-financing Tier III scheme.