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04.10.2008 Social News

Pension Benefits For Housing Collateral

By Samuel Nuamah - newtimesonline.com

UNDER the second-tier scheme of the new pension reforms, workers will be able to own houses before retirement, using their pension benefits as collateral.

According to Mr T. A. Bediako, Chairman of the Pension Reform Implementation Committee, under the tier, workers would not need to get the 25 per cent collateral of the cost as normally demanded by the banks, but could use their future lump sum benefits to secure mortgages.

Speaking at a symposium on the new pension reforms yesterday in Accra as part of activities to mark World Teachers Day celebration, Mr Bediako said with the arrangement, workers would have better control over their pension benefits under the privately managed second scheme.

He said to improve benefits and ensure retirement income security for Ghanaian workers, a contributory three-tier pension structure of two mandatory schemes and a voluntary scheme is to be introduced.

The first tier, according to Mr Bediako, will be a mandatory basic national social security scheme that would incorporate an improved system of SSNIT benefits, mandatory for all employees in both the private and public sectors.

The second-tier, which is a work-based pension scheme, he said, is mandatory for all employees, but privately managed, and designed primarily to give contributors higher lump sum benefits than presently available under the SSNIT or CAP 30 pension schemes.

The third-tier scheme of a voluntary provident fund and personal pension schemes, is supported by tax benefits incentives.

"Provision has also been made in the third-tier scheme to cater for the peculiar needs of workers in the informal sector of the economy which covers about 80 per cent of the working population," he said.

Mr Bediako said workers of 55 years of age or more, would not be part of the new pension reforms, as they have very few years to go on retirement.

He however added that the committee had been tasked to make recommendations as what should be done for people in that age-range.

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