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23.10.2008 Social News

Pension reforms in Ghana: the new three-tier pension scheme - benefits and safeguards Daniel Aidoo Mensah – Project Consultant, Pension Reform Implementation Committee

By The Statesman

The National Pensions Bill, 2008

The Pension Bill caters for the establishment of a new contributory three-tier pension scheme with a National Pension Regulatory Authority to regulate and oversee the efficient administration of the composite pension scheme. 

The new scheme will comprise two mandatory schemes and a voluntary scheme as follows:

(a) first tier basic national social security scheme, which will incorporate an improved system of SSNIT benefits and shall be  mandatory for all employees in both the private and public sectors; (payment of  only monthly pensions and related benefits such as survivors benefit)

(b) second tier occupational (or work-based) pension scheme, 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; and 

(c) third tier voluntary provident fund and personal pension schemes, supported by tax benefit incentives to provide additional funds for workers who want to make voluntary contributions to enhance their pension benefits as well as workers in the informal sector.

The first tier basic national social security scheme will be managed by a restructured SSNIT.

The second tier and the voluntary third tier will be privately-managed by approved Trustees licensed by the Pensions Regulatory Authority with the assistance of pension fund managers and custodians registered by the Authority.

Benefits of the new scheme

Generally, the new scheme has a number of benefits for workers in both the formal and informal sectors including the following:

· Improved qualifying conditions for SSNIT pensions (15 instead of 20 years) and survivors benefits (calculation period increased from 12 to 15 years) under the first tier basic national social security scheme

· Balanced representation on the Board of Trustees of SSNIT with chairmanship rotating among the Government, Employers Associations, and Organised labour.

· Improved second tier lump sum benefits higher than existing Cap 30 lump sum benefit and much higher than that of SSNIT. 

· Using future lump sum pension benefits to secure mortgages. This means that workers can obtain their own houses before retirement by using their pension benefits as collateral.

· Workers will have better control over their pension benefits under the second and third tier schemes, which are to be privately-managed.

· The second tier mandatory and privately managed defined contribution scheme is equitable to all members as amount of accrued benefit is directly related to the contributions made.

This will also serve as a positive incentive for scheme members to make additional voluntary contribution in third tier so as to accrue more benefits for their retirement.

· Special Pension for the informal sector which has been neglected all this time.

Transitional arrangements

 The Cap 30 scheme is found not to be sustainable and so will be phased out within four years from the commencement of the new pension law

No new entrants will join CAP 30 when the new law comes into being. The Controller and Accountant-General's Department will however continue to administer and pay gratuities and pensions to those who will remain on Cap 30 while it lasts.

There will be a decentralized public sector pension management and a restructured administrative system for CAP 30.

This will minimize the current hardship encountered by pensioners where they have to come to Accra to receive their pensions. They can now receive pensions at the districts.

When the new pension law is passed, all workers currently on the SSNIT Scheme and below 55 years will automatically join the new scheme.

However, workers aged 55 years and above will be exempted but have the option to join the new scheme.

Safeguards and impact of the new scheme 

To ensure that contributors" interests are adequately protected, the National Pension Bill has in-built safeguards.

These include stringent approval and registration criteria by the Pensions Regulatory Authority; separation of functions of Trustees, Fund managers and Custodians; on-going monitoring among several others.

 Trustees licensed by the Authority would be required to take out adequate insurance to indemnify scheme members against any losses of scheme assets caused by malfeasance or misconduct of the trustees or their service providers.

Among other impacts, the new scheme will ensure improved living standards of the elderly; financial autonomy and independence of retirees; increased national savings and availability of long term funds for economic development; and the Promotion of growth and development of the capital, mortgage and insurance markets. 


Pension reforms are happening all over the world and Ghana is no exception.

It is envisaged that the new three-tier pension scheme will enhance pension benefits and increase the retirement income security of workers both in the formal and informal sectors. 

I trust that all stakeholders would appreciate the advantages that the new pension scheme holds for them and their readiness to participate in the ongoing pension reforms.