An Actuary’s Review - Open Letter to the Presidential Commission on Pensions

The Presidential Commission on Pensions is to be congratulated for a good job done on such a wide-ranging scope of topics. Executive Summary A pension plan is supposed to help maintain a pensioner's living standards, based on the history of his or her prior earnings. In the same vain it cannot make the pensioner better off than during the working years. Otherwise there will no incentive to work if one can find a means to get into retirement in order to be better off.

The attempt to reform the pension system in Ghana should start off by clearly defining and articulating the percentage of pre-retirement income the government intends to replace with pension income during retirement. Financial adequacy and equity should be the guiding principles here. The global standard for income replacement ratio is about 70%. The 30% reduction in income during retirement comes from on average: 15% income tax rate, 5% Social Security contribution rate, and 10% work related expenses such as clothing and transportation that will not be needed during the retirement years. The current 15% payroll tax going to SSNIT is sufficient to cover on the average 65% of the pre-retirement income, with annual inflation adjustment equal to 65% of the scheme's investment earnings rate. The proposed 11% in the Commission's report to be left with SSNIT in the future will cover close to 50% of the pre-retirement income.

It is shocking to learn that the insidious encroachment of corruption into the society has not spared even a pension scheme. The current gold standard of public pension schemes in Ghana, as evidenced by the clamoring for its benefits by the Ghanaian workers, the CAP 30, and as described by the Pension Commission report, is a corrupted pension scheme designed to favor the retirees at the expense of the taxpayer. The design is seriously flawed. It appears the original plan has been tampered with to suit the ends of some people. It is giving away the taxpayers money to some retirees without merit and justification, beyond what the retirees actually earned in pension benefits.

For example, the formula used in calculating the CAP 30 benefits uses a guaranteed period of 20 years in a country where the recent SSNIT data (1998) on its contributors shows a gender blended life expectancy of about 15 years at age 60, the compulsory retirement age. Moreover, CAP 30 does not discount these 20-year payments with interest for the lump-sum payments. The time value of money means nothing in this pension scheme. These two violations of fundamental actuarial principles that underlie pension calculations add close to 50% more to the cost of the scheme for the taxpayer. It ends up granting 50% more in benefits than the retirees' earned1. The CAP 30 also grants pension benefits at the young age of 45 with 10 years of service without any actuarially equivalent reduction in benefits for the longer period of payments. Once again, the cost to the taxpayer for those retiring early almost doubles for the taxpayer2. The Commission should stop making references to the CAP 30 in its recommendations to SSNIT, for the CAP 30 has no standards worth emulating. The government should do away with it. There seems to be some confusion as to how life expectancy is to be used in guaranteeing payments under a pension plan. Currently there is a prevailing, albeit wrong, assumption that everyone is entitled to guaranteed-benefits equal to the group's life expectancy. NO! If so, then who pays for those who live beyond the guaranteed life expectancy period? The various schemes should make a life-only benefit available in order to achieve the payments commensurate with the life expectancy, with the option to choose actuarially reduced benefits for other forms of benefits. For some will live only a month after retirement and that's their fate, for they only get a month's benefit and others may live past one hundred years and they get most of the benefits. The aggregate number of years lived among the group will sum up to the life expectancy.

The reforms recommended by the Commission for SSNIT did not go far enough in some areas and unnecessary in other areas. In so far as SSNIT is a social insurance scheme, the benefit structure should be revamped to incorporate some of the emerging social issues that need addressing in the society. From Chancellor Otto von Bismarck who formalized social insurance schemes in the 1880's to President Franklin D. Roosevelt who took it to new heights in the 1930's and 1940's, redistribution towards favoring the less fortunate ones in the pension system is a basic tenet. After all, that is the essence of insurance. Paying a retiree over 66 million cedis (over $7,000) a month, according to a GNA article on August 23, 2005, from a social insurance scheme is excessive. Hopefully, this individual actually had a career history of contributions commensurate with that level of benefits. Some of the money could have been redistributed to the less fortunate ones making 125,000 a month. This is an insurance scheme and not an individual savings account.

The gradual but devastating impact of AIDS in the society should prompt SSNIT to switch from lump-sum payment for pre-retirement deaths to monthly payments if there are children under 25 and still in school on the contributor's employee files. The chances are high that the recipients will squander the lump-sums before the children graduate.

The 12-year guaranteed period in SSNIT's pension payments is costly and unnecessary and should be removed. A social security system is no place to look to leaving an inheritance to financially independent survivors. On the other hand, death after 12 years should not leave legitimate survivors who are financially dependent on the contributor without support. A life-only benefit should be the basic benefit. The Marriage Ordinance Act should be extended into pension plans. Married contributors should be paid joint-life and survivor equivalent benefits, with at least 50% of the monthly benefits going to the surviving spouse(s) for life upon the death of the contributor.

The use of final 3-year average salary in the SSNIT benefit calculation is susceptible to manipulation by individuals through sudden and unusual increases in pay during the last three years of contribution to the scheme. SSNIT should switch to an indexed career average. Also, the 20 years required by SSNIT for the payment of monthly benefits is too long for a country like Ghana where employment opportunities are limited. Five years should suffice, with actuarially equivalent benefit payments.

The call by the Commission for the decoupling of the investment section of SSNIT is unnecessary. The current wave of hedge fund scandals in the US should make the Commission approach this with caution. The hedge funds, where only millionaires need invest, are going through this experience for lack of transparency in their operations just like in Ghana where there is so much deference to the experts. The outside investment houses will not be that different from the current SSNIT structure. What is needed is more transparency. The late American jurist, Louis Brandeis, once said, “The best disinfectant is sunshine”. So let the sun shine on SSNIT's investments. After all, it is the people's money and they have the right to know where it is, who has it and how well it is doing.

The Commission is absolutely right in calling for the funding of all pension benefits by the government. This will secure the benefit payments in the future regardless of the government in power's policies towards retirement benefits.

The Commission should not encourage the formation of different schemes by groups such as the Armed Forces'. The critical mass required for the law of large numbers to help spread the insurance risks will be lost and very soon none of these schemes will be financially sustainable.

Finally, the facts do not support the stance taken by the TUC, the Commission and the law luminaries, Mr. J.B Darocha and Professor Kofi Kumado on the SSNIT scheme being a private rather than a public scheme. It boils down to which side should exercise control over SSNIT, the executive or the legislative branch of the government. For various reasons it will be better for the legislature to exercise control instead of the current controls by the executive branch.

The Commission needs to stand firm on all the pertinent issues to make sure the pension benefits are adequate but at the same time affordable for the taxpayers and also not hinder the competitiveness of the private sector with excessive payments into the mandated pension schemes.

INCOME REPLACEMENT RATIO

The Commission has recommended a three-tiered system for the pension scheme in the country, with the emphasis on the public sector. But before any discussion on how much SSNIT or any other tiered system should collect from contributors can proceed one needs a clearly defined and well-articulated Income Replacement Ratio in Ghana. This is the ratio of the pension income to income earned by an individual before retirement. Clearly, a ratio of 70-80% should suffice in Ghana as shown below. The average tax rate in Ghana should not exceed 20%. Other deductions from income during the working years should range between 0-10%. Therefore, the average take-home-pay percentage should be in the range of:

Gross Pay = 100%

Income taxes = - 15%

SSNIT contribution taxes = -5%

Take Home Pay = 80%

Work-related Expenses not needed during retirement= -[0-10%] (Clothing and transportation)

Income Replacement Ratio at Retirement = 70-80% of final salary

Note, pension benefits are not taxed in Ghana. Tiers 1 and 2 combined should not exceed these percentages of the final gross pay. The pension benefits must be indexed for yearly inflation adjustment. The type of calculation or index to be used for the yearly inflation adjustment should be clearly defined in the document governing the pension plans.

Specific income replacement targets should be defined for each tier. SSNIT's target should be enshrined in the law that governs it. My estimates show that the proposed residual 11% that will be left with SSNIT (Tier 1) should be able to fund in the range of 45-50% of pre-retirement income over a maximum of a 30-year career, with retirement at age 60.

The other 5% earmarked for Tier 2 will fund close to 21% of the final gross pay or close to two and a quarter times the final salary if it is to be paid as a lump-sum. So far, we have about 65-70% of the final pay covered, with inflation adjustment for the current SSNIT 15% contribution rate plus the recommended additional 1%, and without the 2.5% “borrowed” for the NHIS.

The voluntary Tier 3 should attract individuals to add to their own pension contributions beyond what is mandated by the law. More than likely employers will add to this tier for their employees.

The idea of a tax-favored tiered pension system beyond social security is a good one. Yet a three-tiered system will be confusing and will lead to unnecessary expenses in running these systems. Already the SSNIT system consumes more than10% of the contributions by way of expenses. The new Tier 2 system will be lucky to find another operating system that will be much cheaper3. Therefore, it will be economically prudent to combine the 2nd and 3rd tiers into one tier. This will give the new 2nd Tier the critical mass to avoid the excessive setup costs and operating expenses for the 2nd and 3rd tiers.

The new 2nd Tier could also be the conduit to allow members to borrow to finance a primary home and other important purchases as proposed by the Commissions.

The use of 30 years of contributions above has an implicit assumption that the average worker will start at age 25, save an additional 5% of income in the new Tier 2 for a total of 10% of pay per annum. Then with anticipated investment earnings of 125% times the average increase in annual salaries being added to the savings, one should have enough saved by age 30 to use as a deposit for a primary home. CAP 30 Based on the details in the Commission's report about CAP 30, the scheme as it exists now is a corrupted pension scheme. How could anyone be paid 100% of his final pay in retirement without any income taxes? How could a pension plan commute a benefit using 20 years where the average life expectancy among the workers according to SSNIT's data is about 15 years at age 60? The lump-sum benefits are commuted without interest? Retirement at the young age of 45 is granted without reduction in benefits for the longer payment period. No actuary could have put such a plan together for the government. The government should scrap it right away and institute something new with financially prudent assumptions for the workers.

The CAP 30 uses a 20-year guaranteed period at age 60 to calculate its lump-sum benefit. The guaranteed period is set to approximate the life expectancy of the retirees. The intent, albeit a shortcut used during the pre-personal computer days, is to pay the percentage equivalent of the life expectancy liability as a lump-sum. Currently, life expectancy of a 60 year old contributor to SSNIT (1998 data) is about 15 years. Back in the 1950's when the CAP 30 was developed, the population of Great Britain, where we may have borrowed our statistical data from, at that time had a life-expectancy of less than 15 years at age 60. Ghana in the 1950's probably had a life expectancy of about 10 years at age 60. So where did this 20-year period come from? Someone must have sneaked it in when no one with any pension knowledge was looking. In addition, the CAP 30 determines the lump-sum without any interest discount over the 20 year period. No wonder others want to be put on this plan. As stated earlier these flaws add close to 50% more to the actual benefits earned by the retirees. The real vexing issue is the granting of full pension benefits starting from age 45. The benefits must be actuarially reduced to compensate for the longer period of benefit payments. This is a license for people to retire from the public service at 45 if they can find jobs in the private sector at that age. This way they can collect tax-free pensions from the public funds and also work for pay at another job. Finally, some retirees are paid 100% of their final salaries under CAP 30. Thus, these individuals are better off in retirement than working.

CAP 30 is not a financially sustainable pension plan for the taxpayers end up paying close to 50% more than what these retirees have earned. The private sector will go broke in supporting such a scheme with its taxes. It should be scrapped or heavily restructured to incorporate the fundamental actuarial principles that underlie pension plans. It needs the restructuring to make it a viable scheme that can withstand the test of financial times and taxpayer support. The SSNIT scheme may not be perfect but in comparison the CAP 30 scheme is a drain on the taxpayer.

Someone left the barn door open here and it has become a free for all pension plan. As noted by the Commission, no one knows the whereabouts of the evolution of the documents governing the CAP 30. Moreover the benefits have no actuarial basis. Yet the Commission at one point wants SSNIT to pay similar lump-sum benefits.

The government should be firm in its resolve to move the economy forward by not awarding benefits not earned under CAP 30. The scheme is UNSUSTAINABLE since its structure is flawed and the government in good conscience should not allow the taxpayers to support the current CAP 30. In so doing it should point out the new Income Replacement Ratio of the combined tiers. For those already in the plan, the government should put them on the same replacement ratios it adopts. SSNIT Some of the recommendations by the Commission for SSNIT were right on the mark but others could wait.

The increasing devastating impact of AIDS and the high rate of fatal accidents on the roads should prompt SSNIT to switch from lump-sum payment for pre-retirement deaths to monthly payments to help out if there are children under 25 and still in school on the contributor's employee files. The lump-sum payments will be more than likely wasted on quixotic business ventures by the recipients in a few years, leaving the children without enough resources to get through school. Most of these recipients will still lose money even if they are given the sole license to sell iced-water at Makola during the dry season. SSNIT should keep the income flow similar to what would have been if the contributor was still alive to help the children get out of school.

Depending on an individual's situation in an insurance scheme, he or she may complain about others in the pooling-of-interests scheme getting an advantage over the rest. Let us look at a true and tried hypothetical case about why no sectional group gains an advantage over the rest in an insurance scheme. Take a Mr. Sowah currently earning 100 million cedis a month in pay. He started work at age 25 and has contributed to the SSNIT scheme. He is now 35. He was involved in an accident earlier this morning and has lost both arms at age 35. He is scheduled to get a monthly benefit of about 50% of his monthly salary for the rest of his life, with inflation adjustments. He is the less fortunate one in this case for not being able to live out his dreams. Others may complain that he contributed cumulatively, 10 years * 0.175 per annum, or 1.75 of his annual salary. Thus he will collect more in benefits over 4 years than his cumulative contributions. So if he lives for another 30 years, the scheme will use other people's money to pay him. That is correct, but will anyone who is complaining want to trade places with Mr. Sowah in order to gain his “advantage”? On the other hand, if Mr. Sowah makes it into retirement at age 60 unscathed, it is only fair that some of his contributions is used to support the financially less fortunate ones by capping his benefits. These less fortunate ones would have supported him if he had become disabled at age 35. That is the true meaning of insurance.

SSNIT should cap benefits payments at let us say the 75th percentile of the distribution of the indexed final pay among the contributors. This is social insurance and there should be a form of redistribution. For example in the US, the tax rate for Social Security contribution is 12.4% (split evenly between employee and employer) up to the first $90,000 of pay. The upper limit increases every year by the average wage increase in the US. Thus a person making the upper limit over the years pays more than twice in contribution than a person making the average national salary of about $40,000. Yet when they retire the person making the $90,000 gets close to 25% of the $90,000, which is $22,500 in social security pensions. The person making the $40,000 gets 40% of his pay, which amounts to $16,000 a year in social security pensions. The $40,000 earner receives more than two-thirds of the benefit received by the $90,000 earner, even though he paid less than half of the other's contribution. The US social security system invests in treasuries only. SSNIT invests in corporations that carry more risk and should therefore return more than treasuries. SSNIT's benefits should on the average be more generous in comparison to the US system.

Those who earn above the 75th percentile in pay distribution are well to do enough that they may not need the full social security benefit to thrive in retirement. The extra money could be used to boost the lower paid contributors' pensions and pre-retirement deaths and disability benefits. Moreover, if the data was available and will not cause any class warfare, it may be able to prove that the higher paid individuals, as a group, live longer to collect more of the monthly payments because of their financial resources to purchase the best that healthcare can offer and also their generally higher living standards.

The 12-year guaranteed period in SSNIT's pension payments should be substituted for by other actuarially equivalent benefit options with social values. A social security system should not award benefits to financially non-dependent survivors. Using a life-only benefit will increase the monthly benefit above the 12-year guaranteed period benefit. The choice of options such as 50% joint-life and survivor will be on the average equivalent to the 12-year guaranteed benefit. Contributors with other needs can choose other options with the necessary adjustment to their monthly benefits.

The use of final 3-year average salary in the benefit calculation can easily and probably is being gamed with sudden and unusual increases in pay during the last three years of contribution to the scheme. It can also be unfair and inequitable in some circumstances.

The auto manufacturers in Detroit, Michigan learned an expensive lesson some years ago when they used the final year pay as the standard for pension benefits. All the overtime work was purposefully allotted to those in their final year of employment on right of first refusal basis by their supervisors. So, on the average someone who was tracking to finish with $50,000 in wages was finishing up with $80,000. Some of the companies quickly moved to final 5-year average, others disallowed overtime in calculating pension benefits altogether and others used the company average increase for the year for each individual retiring at the end of that year.

Let us look at three hypothetical cases.

Case 1: Mr. Yakubu works for 30 years at a private firm until age 52 making salaries around the 90th percentile among the contributors to the scheme when the company goes bankrupt. Mr. Yakubu starts a small business making close to the 25th percentile and continues paying his salary contributions to SSNIT until he retires at age 60. He ends up with a 3-year average of the 25th percentile in SSNIT pensions.

Case 2: Ms. Yamoah works for 27 years until age 47 with salaries around the 30th percentile among the contributors. She quits to run the Dubai route and makes no contribution to SSNIT for the next 10 years. At age 57 she starts sending contributions to SSNIT based on the 80th percentile in income among the contributors. She ends up with a SSNIT pension benefit of the 80th percentile.

Case 3: Mr. Mensah works for the family sawmill. He has ranked around the 50th percentile in salary contributions to SSNIT during his working years. During his last three years before retirement, the family decides to give him a salary in the 95th percentile range, with the understanding that this is meant for SSNIT purposes only. He gives the rest back to the company in various forms. He retires with a pension in the 95th percentile range.

Based on the above cases, which show that there are serious flaws in the current final 3-year averaging SSNIT should switch to an indexed career average.

SSNIT's requirement of twenty years of contributions before the payment of monthly benefits is too long for a country like Ghana where employment opportunities are limited. Five years will do. Proportional benefits based on a five-year contribution can easily be calculated. SSNIT's monthly benefit payments will reach a greater proportion of the population and hopefully generate some goodwill. The associated expenses should be minimal since the payments are mostly computerized. Anyone with less than five years of contribution forfeits the contributions. The current practice of refunding the contributions with interest to those with less than 20 years of service should be discontinued. This is an insurance system and one needs a minimum number of contributions to qualify for a benefit, otherwise you forfeit.

The current wave of hedge fund scandals in the US should make the Commission cautious about the call for separating SSNIT's investment department from the core business of SSNIT. What makes the other investment houses different from the SSNIT's investment department? Nothing. What is needed is more transparency. The Director General, the Chief Investment Officer, and the auditors of the companies they invest in together with the heads of rating agencies should appear in parliament to answer questions about the prospects of these companies at least twice a year. If and when our capital markets become efficient, then SSNIT can trade directly in the markets and not the current scam-prone private equity investments that have bedeviled it in the past.

Also, a detailed publication of SSNIT's investments on its website could be a start. The law governing SSNIT should establish some form of liability recourse to the: owners, management and Board of Directors of any corporation that SSNIT invests in, should it turn out to be a sham. The penalties, besides the financial liability must include banning those involved from ever having any association with any corporation that has any investments or borrowings from the financial sector including banks. SSNIT - Private vs. Public Entity The facts do not support the position taken by the Commission, the TUC and the legal luminaries, Mr. J.B Darocha and Professor Kofi Kumado. Not knowing what was asked of the legal folks makes it difficult to comment on why they can reach such a conclusion.

Here is a scheme where the contributions are mandated by law with no way to opt out legally if that is what one wants. The law also allows the deductions to be tax-free together with the inside build-up (investment earnings). If it was a private entity such as stock purchases or bank savings, there would have been the usual taxes on the earnings. So why would the government give up all these taxes without a say? Let us not forget that, no matter who controls the trust, in the unlikely event of a bankruptcy the government can never absorb itself of liability for making the deduction mandatory. As the old saying goes, he who pays the piper calls the tunes. Everyone knows where the private investment schemes are; they are the banks, insurance companies and the stock market where one can deposit his or her money out of one's own will without the law mandating it.

It appears the government branch tasked with preparing and delivering the cheque to pay for the tunes has been calling the tunes instead of the branch that makes the rules for disbursement. The real issue here is the overbearing controls being exercised by the executive branch of the government. The thrust must be to get parliament to pass strong enough laws to wrestle the control back to parliament. They could have it in such a way that any major changes will require a super majority of let us say 80% of the parliament. This will make sure the parties work together for the good of the people to get anything passed. LUMP-SUMS It is hard to fathom the workers fascination with this benefit. It appears to be a holdover from the years when it was difficult to distribute monthly checks during retirement. Distributing monthly checks is not a problem now so what is the need for this lump-sum benefit? This benefit reduces the monthly payments by 25%. There is a feel-good touch to this benefit, when a worker who may not have had a lot of savings over the years gets a payment of more than two times his salary at retirement, tax free. That is where the good feeling ends.

The Commission appears to be giving a resounding nod to the continuation of this benefit. Maybe the Commission should have studied how long these benefits lasted with those who have received them in the past. More than likely it was not very long. They are mostly gone within three years. The majority of those who try to enter into the selling business with the money, and thus continue to ruin the landscape with kiosks and stores in front of every house, also fail miserably just like their counterparts around the globe who receive such benefits. These are mostly 30-plus-years veterans of the 9 am to 5 pm routine getting in over their heads with business ventures at age 60. Once again, most of these recipients will still lose money even if they are given the sole license to sell iced-water at Makola during the dry season.

Someone once told me during a pension seminar in Ghana that this is the money to be used for securing the “Abusuapanin” and other honorary titles. That is all well and good, for you may even live longer to collect on the monthly payments if you are in such a respectable position in your family. But the pension benefits are calculated to cover one's living expenses only and not title chasing expenses. Spending the lump-sum money this way will leave the retiree poorer soon.

Going forward, if the pension laws are written well, with clear-cut inflation adjusters, this will certainly fall out of favor.

EXPENSES

SSNIT's expenses may be too high as indicated by the Commission. But what is puzzling is that the ministry of finance under which both the IRS and SSNIT operate allows both entities to maintain different offices and staff in the same towns. This is inefficient and a waste of the taxpayers money. Above all, it must be a big inconvenience for the employers to be constantly dealing with both the IRS and SSNIT agents separately. This is one area SSNIT can look to cut some costs by combining forces with the IRS. The Director General and his Deputy are no strangers to cost cutting exercises, based on their work in the US. They can look back to the US where if the acquisition and operating costs of a savings product in an insurance company exceeds 5% of the annual premium and 0.5% of the fund balance respectively, the company will be out of business in no time. But will they have the free hand to cut costs? Your guess is as good as mine.

FUNDING

The Commission's position with regard to the funding of public pension plans is a laudable one. The government needs to charge the costs of all incurred expenses in this regard to the current year's budget according to the newly International Accounting Standards. It is always easier for governments to make promises that they do not have to pay for right away. Paying the accrued annual pension expenses will bring some discipline to the budgetary process. Above all, it will secure the future of these pension payments.

RETIREMENT AGE

The writer agrees with the Commission on putting the question of whether or not to increase the compulsory retirement age from age 60 on the backburner for now. But it needs to be revisited every five years. The continuing gains in life expectancy around the globe make it difficult to retire workers who are in great physical and mental shapes at age 60.

OUR EXAMPLES

It is puzzling to see the Commission looking for examples in countries that are still fumbling with their pension plans such as Nigeria and other African countries. Sometime in the mid 1960's, Mr. Owusu, my class two teacher at AME Zion Primary School at Kumasi-Asafo, separated his class into different rows based on an individual's exams ranking. He then stood between rows C and D, and told those in rows D and lower to look for their examples in rows C and higher. It worked. A lot of the children who started in rows D and lower worked their way up to rows C and higher later during the year. Let us hope we can look for our examples in countries that have actually succeeded at the task at hand and not just because they have similar cultures and economies like Ghana's. Then also, there is the belief that we were supposed to be the trailblazers given the starting position afforded us by the Osagyefo?

CONCLUSION

It appears that the Commission chose to treat all of the employee groups' demands with kids-gloves. It noted all the faults buried in the CAP 30 plan but chose to paper over it. Why is it acceding to the Armed Forces' demand to have its own social insurance plan outside SSNIT or a restructured CAP 30? Tomorrow it will be the teachers and the miners will follow. And very soon every group will have their own social insurance plan. The critical mass required for the law of large numbers to help atomize the risks will be lost and none of the schemes will be viable.

The few issues the Commission chose to stand firm on are the ones that had been bandied about by the press such as SSNIT's investment section problems and the ownership of the SSNIT trust; given what the executive branch did with the hiving of the 2.5% for the NHIS. The Commission needs to stand firm on all the pertinent issues to make the pension benefits adequate but at the same time affordable for the taxpayers.

The Commission seems to entertain some hope that SSNIT may get the 2.5% now being used for the NHIS back. If my almost 15-year work experience with the costs of private insurance health-plans is anything to go by, the Commission better protect the 15% left from further poaching by the NHIS and not hope for getting the 2.5% back.

Once again, let me thank the Commission for the good job it has done so far in bringing out the issues for people like me to comment on them. The task ahead demands striking a good balance among competing interests from: the treasury needs of the government, adequacy of pension savings and payments, to preserving the global competitiveness of the private sector that bears the brunt of the taxes that fund the public pensions. Keep up the good work.

In sum, for what it is worth, these are the professional thoughts of another “runaway” Ghanaian talking “by-heart”, from the US. Appendix The assumptions below were used in my calculations above, with varying contribution levels.

1 The following will demonstrate the almost 50% extra cost of the CAP 30 benefits Even the mathematically challenged can do this. Just remember your BODMAS

[table not included due to formating problem]

2: Payments from age 45 to 60 introduces the equivalent of 15 years of payments in addition to the15 years expected at age 60, thus almost doubling the cost.

3. The writer is part owner of a firm, a Third Party Administration (TPA) company, that provides pension plan and life insurance administrative services, actuarial services and retirement plan design consulting to employers and insurance companies in Ghana. F. Yaw Berkoh Nketia, is the chief actuary of SCOR LIFE US in Addison, Texas and a fellow of the Society of Actuaries.