Social security and pensions began a few years after the birth of industrialization.
Almost every country on earth has a social security policy for its citizens.
Social Security in Ghana
If you are working in Ghana, you and your employer would be contributing 5.5% and 13%, a total of 18.5%, as social security towards your retirement under the current tier pension scheme.
11% of the 18.5% is paid to the Social Security and National Insurance Trust (SSNIT).
2.5% of the 18.5% is also paid to the National Health Insurance Trust Fund. for your national health insurance benefits.
The remaining 5%, which is called "tier 2" out of the 18.5 percent, is invested in a private pension fund trustee management company for your retirement purposes.
Social Security Laws in Ghana
Ghana has used a number of social security laws since the scheme was introduced in the country.
National Pension Act, 2008, Act 766 in Ghana
This act is the newest national pension act in Ghana, amended in 2014 (Act 883).
Act 766 established the National Pensions Regulatory Authority (NPRA) to regulate all social security and pension scheme issues.
The act divides pension schemes in Ghana into three tiers, and each tier has its own features.
The pension management companies are licensed and regulated by the National Pension Regulatory Authority (NPRA). They manage the tier one, two and three funds from social security contributors.
Pension Fund Trustee Management Companies
These are companies licensed and regulated by the National Pension Regulatory Authority (NPRA). They manage the tier one, two and three funds from social security contributors.
Profit-Making
The pension fund management companies that manage tier two and tier three contributions from employees are all profit-making companies.
They seek to make a profit for their capital providers first while also giving returns to the contribution providers.
The conflict between making more profit for the owners of the companies and putting higher rates of interest on contributors’ funds is not an easy one. It is not easy to balance and to practice and to attain and maintain it. Managers often look for short-term benefits. Contributors look for long-term benefits. But who is in control? The manager.
Licensing fees and other charges are paid by the pension fund management companies to the NPRA.
Profits made from using contributors’ funds are used for many purposes, including giving some back to the fund contributors in the form of interest.
It is clear from the act that fund managers can trade with the funds of contributors. The act restricts the managers on the types of investments they ply their trade.
It is not easy to make meaningful profits for operational expenses and for part of the profit to be given back to the fund contributors in the form of interest.
Many fund management companies ply their trade in the money markets where short-term securities are traded. They also in the capital markets where long-term securities are traded. They are restricted by Act 766 as to where they can trade.
The markets have their risks and rewards, just as all markets do. The continuous increase or growth in rates of interest for contributors cannot be guaranteed.
Continuous growth in contributors’ funds year in and year out for even ten years cannot be guaranteed.
By a decade, many fluctuations would have happened in the markets where the pension fund management companies ply their trade.
Negotiation for Interest Rates on contributions
Currently, Act 766 (as amended in 2014) does not allow individual employees to negotiate the rate of interest on their contributions.
Staff contributions are managed on behalf of employees by appointed trustees.
So individual contributors, who are the real owners of the money, have no meaningful say in the management of their contributions.
No minimum interest rates on contributors’ funds
The law does not place any minimum guarantees of interest rates for contributors’ funds placed with pension fund management companies.
Interest rates are competitive in the fund management market, and different companies offer different rates of interest in tandem with regulations by the NPRA.
Individual contributors do not have the power to negotiate for better rates of interest on their contributions.
The trustees act on behalf of the contributors to determine the interest rates, whether good or bad.
A contributor does not have much say directly with the fund managers.
Additionally, it is not friendly to move funds between or among fund management companies, as some costs would be incurred. The differences in the rates of interest are not widely attractive.
In this case, many trustees would just "trust" the already selected ones, though some give better rates of interest and provide better client services.
In the game of investment, where there is little control or no control over one’s investment, the risk is higher. Such investments are very risky and usually result in smaller gains or losses.
This is what truly happens under the current tiers two and three of Act 766.
Fees
The National Pension Regulatory Authority (NPRA) was set up by a parliamentary act (Act 766). This act seeks to regulate fund management companies including the Social Security and National Insurance Trust (SSNIT).
The companies manage the various tiers under the act.
All pension fund management companies have to be legally licensed by the NPRA to be able to operate as pension fund managers.
As these companies pay for renewable licenses, the government would continue to regulate them by charging them increased license fees as the years go by. NPRA has fees that the pension fund management companies pay to it.
Some of the fees are paid as one-off expenditures but many are paid periodically. Ultimately it is the contributors, who carry the burden.
The fund management companies are profit-making organizations and would surely pass on the burden to the final consumer and in this case the pensioner.
It is the pensioner, who bears the burden. Fees undoubtedly reduce the value of the pensioner’s retirement benefits.
Sometimes, even fees paid over the entire period of the scheme get higher than the totality of interests accrued over the same period in increasing relative terms.
Fees are also paid to the trustees, custodians, etc. from the funds for the contributors.
All these fees go on to devalue or reduce the effective amount that the contributor gets when he goes on retirement.
It is very important to understand these fees and who is paying for them as they could have a significant impact on your pension fund.
Fees have a serious impact on the value of pension funds over a long period.
The fund managers are financially literate. They would pass all the costs to the employee or the contributor eventually.
The employee now creates jobs for many people and especially the fund managers.
Many trustee companies are seeking to manage pension funds in Ghana.
As to whether they have the technical know-how, the financial capacity and the qualified human resources to manage the employees’ second and third-tier funds, only time will tell.
Already some private equity and other fund management companies have been closed down by the Securities and Exchange Commission (SEC) for many wrong reasons.
How long would the pension fund management companies live to survive, grow and make profits for themselves and the contributor? Time shall tell.
Power of the contributor
We know that where you have no control over your own money or asset, you have no real say about its use or misuse. The employee, who owns the funds, is being mandated by this new pension act to:
- Know information about your payroll deduction arrangements with your employer.
- Know how much is deducted from your contribution or how much contribution you pay to the scheme.
- Know the contact details of the trustee of schemes, such as the name of the representative of the company, phone and fax number and email.
These are all that the employee needs to know. Not even do but only know. It is interesting to know that without the employee working, all the other stakeholders cease to exist.
How can the one who is supposed to be the most powerful is being relegated to the ground? These three bullet points above do not say anything about the power and real interest of the employee.
They do not empower the employee to take decisions on his sweat or his own money.
Contributions are done individually according to each employee’s basic or base salary, yet the individual has no power to take decisions on the money he/she alone has contributed.
Those, who do nothing for the fruition of the cash are the ones that even have the power and authority to decide for the employee.
The absolute power should have rested with the contributor to decide what he or she wants to do with his/her money but the irony of man-made life is what prevails.
Lump Sums
Lump sums from tier 2 and 3 are given to contributors on retirement without education.
I keep asking this question.
Why it is that money is kept aside to be given to people later in life yet those people are not given some kind of education or training on how to manage their hard-earned money?
The laws allow that all cumulative tier two and three contributions be paid to contributors when they go on retirement.
Yet no education is given to them on how to invest when they get the money.
Some education or training should be given to the contributors to help them make good use of their money.
They can therefore live dignified life if that was the real purpose for which the money was contributed.
Training in Entrepreneurship and or Financial Literacy is not given to the people.
All they do mostly is leave their money with the banks that give them peanuts as interest.
Pensioners try to invest in projects that they do not have the expertise and they fail, wasting away their pension money.
I have learnt that there are no bad investments, but there are bad investors.
You cannot wake up overnight and start investing in any business venture that you do not know inside out and expect to make good profits.
While no knowledge is gained in Financial Literacy and or Entrepreneurship, people retire and within a short time, all their retirement money is gone.
It is given back to governments through ignorance and lack of education on money matters. Who benefits more?
Tier Three (3)
Under the new pension act in Ghana, Act 766, voluntary or personal contributions or provident funds, are contributed by the employee and by the employer.
The contributions are also given to private pension trustees or private pension fund managers to manage the contributors.
I do not know why they copied this old thing into Ghana and think it is the best for the Ghanaian worker.
The form and substance of the new pension law in Ghana, Act 766 is practised in many countries and employees are not happy about the benefits to them.
Ghana should have crafted its own to benefit the employee but it is not.
Many employees in those countries where similar schemes were first introduced know very well that they are not the best schemes for them.
Their own money is handed over to third parties by the powers of some laws while they stand somewhere and watch their money being manipulated by outsiders.
Withdrawals from Tier 3
Under Act 766, contributors cannot make withdrawals freely from Tier 3.
Withdrawals from Tier 3 are tied to tax applications if done before a set period.
Withdrawals must wait for five years (informal sector) or ten years (formal sector) in order not to attract taxes.
This discourages many from withdrawing because the law says that you would lose some money if you withdrew before the stipulated time, depending on the sector you find yourself.
Why should people be restricted from getting their own money that they have voluntarily contributed?
Social security is handled by governments on behalf of the contributors.
Governments are supposed to seek the best interests of the citizenry but the interest of governing prevails first.
It would be assumed that policies and decisions of governments would benefit the masses but it is not always the case.
Many governments’ policies and decisions do not benefits the masses.
It is therefore not surprising that governments are changed often through elections or illegal violence in many countries.
Provident fund, being a voluntary contributory fund should not be tied to government laws, as the laws take years to change.
Everybody knows that laws enacted do not change easily. They take time and some even remain in the statute books forever as if man lives forever.
God has made the change permanent, yet man has refused to admit that change is permanent.
Very little option is given to organizations that even have the competence, expertise and financial intelligence to manage their funds.
Who benefits more, Employee or Government?
You are made to believe that the 13% contributed by the employer is not your money but money from the employer, so it is given to you free of charge.
Do we have anything free on earth? If it is that free then why don’t they contribute some for the destitute in the streets?
So the truth is that the total of 18.5% is the employee’s money. Yet many employees are ignorant of this and keep saying that my organization contributes 13% to me.
They are the people, who, need more financial support but do not get it.
I know you would say the laws do not allow that, but why don’t they make the laws to allow for that?
It is because, the employer, the government for that matter is the greater beneficiary.
Maybe, you have been conditioned in a way that it wants the best for you and you believe it.
However, indirectly, the government is seeking more in its own best interest for more money from you.
The government wants money to spend on productive and unproductive ventures.
This happens all over the world with employee social security contributions.
The Bible says for lack of knowledge my people perish. Since many always refuse to learn, they would always lack knowledge in many areas that do not even require in-depth learning.
Social security contribution is another form of tax. It is the employee’s money that is being taxed.
It cannot, therefore, be true that it is the employer that adds the 13% free of charge.
It is a form of tax deducted and some are given back to you later down the years.
When its value would have been devalued by inflation and other economic money eaters.
Now, the law in many countries says, though, it is your own money.
It is yours but you cannot touch it till you are old enough.
Till you are old enough to be ‘wise’ to handle that much before some percentage or all is given to you.
So you take it at a time when you are old or when you are in your grave so it could be given to someone you chose or did not choose to waste it and return it to them.
As you contribute the money for many years before some part is given back to you, the government gets paid monthly by you.
It is paid by you to help it embark on some projects; let’s say investment projects purported to increase the value of your money though not exactly.
However, in most occupational pension scheme laws, contributors do not get increased returns in the form of compound interest.
Yet their money would be used for investment projects that yield compound interests. Who gains more? The government or you?
Regulatory issues
The National Pension Regulatory Authority (NPRA) was set up by a parliamentary act (Act 766) in 2008.
This act gives NPRA the mandate to regulate fund management companies including the Social Security and National Insurance Trust (SSNIT). The companies that manage the various tiers under the act.
When Act 766 was enacted in 2008 the government gave one year as a grace period to all organizations for preparation and transition from the old law to the new one.
The funniest stuff is that SSNIT in substance is stronger and bigger than its regulator. The muscles of NPRA are youthfully feeble. It may take some time before it gets strong teeth to bite.
But SSNIT does not stand to wait. It also tries to become stronger through its mismanagement of contributors' funds is alarming.
Its future survival into the next thirty years and beyond is in doubt if its management mindset and investment strategies do not change.
It is an established sad fact many private indigenous companies in Ghana do not live long to last.
How many of the new pension fund management companies will stand the test of time? Only God knows. I hope this sector does well for the Ghanaian worker.
There are many documented regulatory issues in Ghana. It seems many sectors of the Ghanaian economy are not well regulated due to corruption and many wrong practices.
Bribery and corruption play major roles. Laws and rules are broken through the whims and caprices of the power-that-be.
We say in Ghana that the laws can only punish harmless small insects. The laws cannot bite when a big animal is involved.
The laws do not seem to operate fairly and equally. The employee can hardly have a fair hearing when he is seeking his rights.
It is believed that a good number of private fund management companies are owned by politicians whose true identities are hidden. For obvious reasons, they always try to hide the ownership of the companies.
They are players and referees on the field. It is a fact that laws in Ghana do not work depending on who is in power. The bend the laws and rules to benefits themselves or their interests.
Government in Control
Greatly, the government is in control. Those pension fund management companies that mess up with the management of contributors’ funds would be punished and made to pay huge fines and penalties.
As the companies are expected to do well, not for the real benefits of the contributors but for their survival, the government would continue to be the greatest beneficiary.
The funds are managed by organizations that are controlled by the government through its regulatory agencies.
The government steps in once a fund management company begins to mess up.
Retirement Plan
“Retirement’s the most wonderful thing. I get to enjoy all the things I never stopped to notice on the way up. After an extraordinary life, it’s time to enjoy my retirement.” Patrick Macnee
As mortal human beings, one day we will get energetically worn out. A time will come when we cannot perform our daily duties.
When we are strong and working hard, we should know very well that one day we would get retired from active work.
Our productivity would have been reduced and our employers or we would be punishing ourselves if we continue to work under such old-age conditions.
Retirement is a must, so we must plan for it. It is heralding, and we should not retire like we never worked or work as we would never retire.
There are various retirement plans. They can only be achieved when there is discipline and adherence to strict plans that one has chosen.
SSNIT Benefits Formula
SSNIT has its formula and is based on it to calculate what it calls the “Earned Pension Right” which determines one’s “Earned Benefit”.
It means whatever retirement benefits one gets from SSNIT must be earned first.
So if two employees contribute the same amount monthly but one contributes longer than the other, the one who contributes longer would have more earned benefits than the one who contributed shorter because their rights are not the same in terms of periods.
However, the amount contributed monthly is key to determining how fatter or bonier one’s pension benefits would be but not necessarily the accumulated number of years per se.
The calculations depend on one’s total number of yearly or monthly contributions.
SSNIT takes into account some best three years’ gross basic salaries which it uses to calculate the earned pension right. The earned right gives the earned benefit for each respective employee who has contributed social security to it.
SSNIT uses the following basis for the calculation of earned pension rights and benefits for pensioners:
- Age of the pensioner
- Average of the best 36 months divided by 3 years’ salary
- Earned Pension Right which is the rating for the number of months one has contributed to the social security scheme (i.e. tier one).
A contributor can earn a pension right between 37.5% and 60% depending on the number of months contributed at the time of retirement.
The minimum contribution of 180 months (15 years) gives a contributor a pension right of 37.5%.
Every additional month over the 180 months attracts an additional percentage of 0.09375% or 1.125% for a year. So, to calculate your pension, multiply your best 36 months (3 years) gross basic average salary by your earned pension right?
Under the current New Pensions Act (Act 766) and amended in 2014(Act 883) 11% out of the 18.5% contributions is tier one which is paid to the Social Security and National Insurance Trust (SSNIT) for the employee’s future retirement benefits.
Contributions paid to SSNIT are placed in an insurance trust for the employee retirement benefits.
Per Act 766, amended in 2014, (Act 883) SSNIT would only pay monthly pension allowances to retirees based on their calculated earned rights and earned benefits.
SSNIT would no longer pay out lump sums to employees again but pays only monthly pension allowances to retirees.
A lump sum could only be paid if the contributor did not contribute up to the required number of 180 months or 15 years.
In this case, the contributor does not qualify to earn a monthly allowance. The contributor is paid a lump sum still based on the stipulated formula used by SSNIT.
Three ways to Retire:
- Retire Secured
You retire secured when you retire and rely solely on your monthly social security contributions made to the Social Security and National Insurance Trust (SSNIT) and the Tier Two contributions.
Tier Two-5%
Five per cent of the 18.5% is also taken away for investment in a private pension fund management company that earns some interest for the employee’s future retirement benefits.
It is believed that this 5% invested with a pension fund management company will generate some compound interest on the monthly principal amount contributed.
Therefore the investment will be growing till the contributors or employees take the accumulated investment when they go on retirement.
Security is meant for people in prison or prisoners, not pensioners who want to have free air to enjoy life before joining their ancestors.
If you plan your retirement on your social security contributions alone, then it is like you agree they should turn you, a pensioner into a prisoner with security secured around you.
You would be helpless and hopeless and not even your children or the government of the day could get you out of that prison because it would be beyond their financial means to do that.
One retires comfortably when one retires with social security as seen above. Plus an additional voluntary or personal voluntary corporate retirement pension plan that comes with retirement benefits to take home on retirement.
In Ghana today, many organizations also set aside a percentage of employees’ monthly salaries for retirement purposes.
These are known as provident funds and they are voluntary retirement plans categorized as Tier 3 under Act 766.
Under Tier 3, employees that make voluntary contributions towards retirement are also regulated by Act 766.
Per that act, those voluntary plans by employees whether in the formal or informal sector are all regulated by the same act or law.
The contributions are managed by private pension fund management companies registered and licensed by the National Pensions Regulatory Authority, (NPRA).
When one retires comfortably, it is better but not best.
You retire free when before or on retirement your money works for you while you sleep.
If you turn your earned income and your monthly contributions into passive income and or portfolio income over a long time, you are likely going to retire free.
To retire free means you already have your statutory social security contributions or 16% monthly contributions in the case of a Ghanaian worker.
You also have your monthly contributions and now you have your businesses or investments all working for you.
To retire free means to have a business or businesses that generate income for you all the time. Remember, a business is any legal activity that gives you income with or without your presence.
So, when you are working and get paid at the end of every month, you devote a percentage (%) to investing in a business.
It can be a good investment scheme that will yield some returns with less risk. You could also set up businesses that would generate higher income for you.
Whether you are still working or on retirement, you can always be an entrepreneur.
So, first, you retire free if you have social security paid to you when you are on retirement.
Secondly, If you have a personal pension scheme for retirement.
Lastly, you have businesses that generate income for you while you are on retirement.
You can now retire for free. To retire free is the best retirement plan and you retire freely and financially independent.
You would have known you would retire and you would have retired knowing you worked.
Types of Occupational Pension Schemes
“It appears history is going to keep happening, despite our hopes for retirement.” (Gregory Maguire, Out of Oz)
Defined Benefit (DB) Plans
Investopedia .com (updated Apr 29, 2020) defined and explained Defined-benefit (DB) as plans that provide eligible employees guaranteed income for life when they retire.
Employers guarantee a specific retirement benefit amount for each participant that is based on factors such as the employee’s salary and years of service.
Employees have little control over the funds until they are received in retirement.
The company takes responsibility for the investment and for its distribution to the retired employee.
That means the employer bears the risk that the returns on the investment will not cover the defined-benefit amount due to a retired employee.
Because of this risk, defined-benefit plans require complex actuarial projections and insurance for guarantees, making the costs of administration very high.
As a result, defined-benefit plans in the private sector are now rare and have been largely replaced by defined-contribution plans over the last few decades.
The shift to defined-contribution plans has placed the burden of saving and investing for retirement on employees.
In Ghana, defined benefit (DB) plans could be likened to CAP 30, for those who work with the security agencies and some other top public servants. Act 766 has bits of defined benefit which is handled by SSNIT.
In the Judicial Service of Ghana some positions also have their retirement benefits in the form of defined benefits.
Aspects of Article 71 of the 1992 Constitution for public office holders in Ghana as described in that article are also have some features of defined benefit plans.
Defined Contribution (DC) Plans
Investopidia.com (updated Apr.29, 2020) defined, ‘in defined-contribution (DC) plans, the benefit is not known, but the contribution is.
It comes in a designated amount from the employee, who has a personal account within the plan and chooses investments for it.
As investment results are not predictable, the ultimate benefit at retirement is undefined. Nevertheless, the employee owns the account itself and can withdraw or transfer the fund, within plan rules.
Defined-contribution (DC) plans are funded primarily by the employee but many employers make matching contributions to a certain amount.
The most common type of defined-contribution plan is a 401(k) in the USA and the Japanese call theirs “iDeCO”.
Participants can elect to defer a portion of their gross salary via a pre-tax payroll deduction to the plan, and the company may match the contribution if it chooses, up to a limit it sets.
As the employer has no obligation toward the account’s performance after the funds are deposited, these plans require little work, are low risk to the employer, and cost less to administer.
The employee is responsible for making contributions and choosing investments offered by the plan.
Contributions are typically invested in selected mutual funds , which contain a basket of stocks or securities, or money market funds . The investment menu can also include annuities and individual stocks.
The investments in a defined-contribution plan grow tax-deferred until funds are withdrawn in retirement. There is a limit to how much employees can contribute each year.
In Ghana under the current pension act, Act 766, amended in 2014, Act 883, pension schemes are divided into tiers.
They are tiers, one, two and three and all are defined contribution (DC) pension plans. They have all the features of defined contribution pension plans.
The majority of Ghanaian workers fall under this category of pension scheme plans for life.
The Top 3 Pension Systems in the World.
In 2021 CFA Institute in collaboration with the Monash Centre for Financial Studies and global consultant Mercer, did a job on the index of pensions.
It used Mercer CFA Institute Global Pension Index to compare 39 retirement income systems that covered pension policies and practices.
The index compared retirement income systems and rated each one based on adequacy, sustainability, and integrity.
The top 3 countries with the highest index grades were the Netherlands, Denmark and Israel.
The Netherlands has a retirement system that uses a flat-rate public pension and a semi-mandatory occupational pension linked to earnings and industrial agreements.
Denmark has a public basic pension scheme, a supplementary pension benefit tied to income and a fully-funded defined contribution plan and mandatory occupational schemes.
Israel has a universal state pension and private pensions with compulsory employee and employer contributions.
4 Types of Pension Plans in India.
India has four types of pension plans for its citizens.
- Government-Backed Pension Plans
- Deferred Annuity
- Immediate Annuity
- Pension Plans with life insurance
Old Age Security (OAS)
In Canada, an Old age security/ pension (OAS) or retirement monthly pension is paid when you are 65 and older.
In most cases you don’t need to apply to get it, it's automatically done for you once there is evidence you are still alive-aged 75 and above and it is increased by 10% permanently.
Money Purchase Pension Plan
This is an annual employer contribution to its employees’ qualified retirement savings plan.
No taxes until it is withdrawn. The employees do not contribute to their pension plan but they may have 401 (K) plans as well.
Disabled Support Pension (DSP)
In Australia, a Disabled Support Pension (DSP) is the main income support available for persons with a permanent disability.
It is income support for people aged sixteen (16) and over but under the pension age. It is also income for people, whose capacity to work has reduced because of disability.
Mult-Employer Pension Plans-(MEPPs)
MEPPs are pension plans from more than one unrelated employer that contribute to the same pension plan. This can be either a defined benefit plan or contribution plan or both.
401K
In the USA, 401k is a popular defined contribution pension plan which is a tax-advantaged retirement savings plan that is sponsored by one’s employer.
Individual Retirement Account (IRA)
In the USA, Individual Retirement Account (IRA) is a long-term savings account that individuals are allowed by law to keep for the future to get tax benefits.
IRA is legally created for self-employed individuals who are not enrolled on companies’ sponsored workplace retirement plans such as 401(K).
You can have an IRA account with your bank, an investment company or through other approved means.
IRAs include traditional IRAs, Roth IRAs, Simplified Employee Pensions (SEP) and Savings Incentive Match Plan for Employees (SIMPLE) IRAs.
Cash Balance Pension Plan
Cash Balance Pension Plan is a defined benefit pension plan.
However, the account is maintained on an individual basis just like a defined contribution pension plan.
Some of the features of the cash balance plan are similar to 401 (K).
The employer by agreement pays or compensates the employee an agreed percentage of the employee’s yearly contribution plus interest for a cash balance plan.
The company bears the risks and rewards of profits and losses to match with defined benefits pension plans.
Army Retirement Plans
In many countries, army officers can serve for say fifteen, twenty or twenty-five years in the army to qualify for lifetime monthly payment benefits. Retirement benefits are based on the number of active service in the army.
Future of Occupational Pension Schemes
“A corporation's responsibility is to the shareholders, not its retirees and employees. Companies are doing everything they can to get rid of pension plans and they will succeed” ( Ben Stein ).
We live in the information age and information abounds away from just a tap of a button.
People get easily informed through various means of acquiring information.
The number of occupational pension contributions will reduce as people get financially wiser by knowing that the best people to take control and decisions on their hard-earned cash are themselves.
Once the people have the power to determine how much to pay themselves, they would give themselves just manageable basic salaries and pay lower social security contributions.
They could plough back what is left into their businesses for growth and expansion for better returns.
Again, until people feel that they are getting the value for their money as contributors and be content with the services of pension fund managers.
People would find legal means of contributing meagre amounts as social security for themselves and keep back the bigger part in their businesses for better investments to yield more income.
Organizations are now adopting ways and means of cutting employee costs to the detriment of the employee.
Some jobs have been taken over by robots and monkeys. Monkeys are trained to work in some instances like human beings and you know they would not demand wages as far as they are fed well. Haha!
We already know what robots are doing. They have replaced human beings in some fields and they do not demand medical care and social security needs. Hmm!
The future of occupational pension schemes looks bleak. It will never belong, say in the next thirty to fifty years many pension fund management companies in most countries will go bankrupt.
They will need more money from their own investments or funds from the government to pay entitled pensioners.
The number of pension contributions has reduced drastically to sustain them. That is why many highly, financially intelligent people say workers’ social security schemes are licensed and legalized Ponzi Schemes.
If all contributors stop contributing in even a month, I bet you all pension fund managers would find themselves wanton to pay pensioners.
What about if all contributors stop contributing for a year or two? Disaster will break loose and pensioners will go to their graves earlier.
I know they would try to defend themselves by saying that they are prepared to handle pensioners’ pensions, but for how long?
They cannot continue if the amount of pension contributions reduces quickly compared to what has already been collected by them and needs to be returned to contributors, who would have become pensioners.
The Future of the contributor and pension fund management companies
“We cannot continue. Our pension costs and health care costs for our employees are going to bankrupt this city” ( Michael Bloomberg )
Employees should watch out that:
- Governments all over the world are distancing themselves from many social responsibilities and very soon they would distance themselves from the social security issues of the worker.
Governments these days do not even want to employ. If they are not employing then how many private companies have the capacity to employ many people in this information age, where super technology exists and performs faster and more efficiently?
The government privatized it and the new company that took over sacked over nine hundred workers and replaced them with few efficient people.
It is reported that many ghost names are found on the Government of Ghana Payroll. One wonders how come the staff registers are not clean if proper records of starters and leavers exist.
They would declare small basic salaries to pay small social security contributions. No law can compel an organization to pay more than it can afford, though there would be minimum wage laws, the minimum amounts would be used.
People want to be deeply involved in decisions concerning their money. This does not happen with pension management as individual contributors do not have the capacity to get involved in decisions about their money.
They just have to trust the government and its licensed fund managers for results, good or bad. Results, appreciable, constant or devalued.
Online businesses have come to stay. People would do almost everything online from their homes. All the people, who would have been employed with such businesses would not be needed. Social security contributions are reduced and cut in these instances.
Even in the 21st century, where software and systems help make things easier and convenient and participatory for all stakeholders, some pension fund managers still waste contributors' time, energy and money on many unnecessary procedures before giving them their money.
These practices do not make people want to give their money to third parties for management.
Third-party independent opinions have weaknesses too. Cases such as Carillion Case, China Medical, Slater and Gordon in the Class Action Case, Enron and WorldCom and many others, including some banks that collapsed in Ghana, were seen to have been audited, yet serious problems arose.
The way forward
Life will call you back home from the fields of work when you can no longer afford to be in the fields for anything good.
Retirement seriously stares into the eyes of employees. Those, who still hold unto the old ways of earning income directly and paid wages.
People who still think that way and only want to depend on that alone for a living would be stressed when they retire.
Times have changed, as I said earlier. God has made change permanent yet man refuses to admit this and always clings to things that keep changing by nature.
People, who do not like change and hold onto old ways of doing things wake up from their sleep only to realize that it was not night this time around.
Employees work wholeheartedly for organizations expecting good retirement benefits when theirs is due. Some organizations have very appreciative packages for their workers, who retired from active service to them.
These benefits would not last if those workers do not have what it takes to keep those packages for the longer purposes for which they were given.
The way forward for any employee working now and knowing very well that retirement is imminent is to realize that their occupational pension scheme alone would not sustain them happily.
What it takes to sustain happiness after retirement would be to learn to invest. Investing is a game learned over time to get experience and not just because one has money and can invest. People should:
- Take classes in financial literacy to help them become financially aware and financially literate.
- Attend investment seminars. Remember, there is no bad investment but there is a bad investor. Would you wait to become that bad investor on retirement?
- Attend practical entrepreneurial seminars.
- Take classes in subjects on money.
- Play games that teach money lessons.
- Read books on money, investments, finance, accounting and economics.
- Listen to investment programmes on radio or CD and or watch TV programmes on investments and financial matters.
- Listen to an audiobook on financial literacy or entrepreneurship
- Read books on health and attend seminars or classes on health issues (health literacy, remember, your health is your wealth)
- Learn to be emotionally intelligent so that when your retirement package goes down the drain when you decide to invest it without investment experience and knowledge, you could handle it in an emotionally, intelligent manner without dying prematurely because you lost your investment.
- Attend short courses that educate you on a wide range of issues. Keep learning many new things before you go on retirement.
Bottom-line
Times have changed. The world is changing very fast every second.
The internet is the greatest treasure. It is the greatest mineral mine.
People get wiser now. People make money through new ways.
Employers now want to spend less and less on the employee.
Control
Once the contributors do not have control over their contributions, getting higher returns or gains on their contributions to maximize their wealth will remain a mirage.
The writer is an Accountant and Financial Literacy Activist.
©2023, Godwin-Xavier Ayeebo. All rights reserved.
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