SSNIT To Undertake Prudent Investments To Enhance The Fortunes Of Pensioners
In the face of emerging challenges that confront the Social Security and National Insurance Trust (SSNIT) as a result of the implementation of the new pension reforms in the country, the Chairman of the Board of Trustees, Mr Kwame Peprah, has stated categorically that the Trust will undertake prudent investments which receipts will positively impact on the long term sustainability of the contributions of employees under its pension schemes.
He said in the past, the Trust had considered socialists projects such as housing for rental at non-economical rates and noted that those projects were eroding the fortunes of pensions, adding “in our quest to undertake these prudent investments, we will not be distracted by any negative comments meant to derail the good intentions of the board and management of the Trust”.
Mr Peprah who made the statement at the 6th Stakeholders forum of the Trust in Accra said following the implementation of the three tier pension scheme, the deductions of 2.5 per cent and five per cent from the 18.5 per cent total monthly contributions towards the national health insurance and the second tier scheme leaves the Trust with 11 per cent for the administration of the first tier scheme managed by SSNIT.
In addition, the minimum contribution period has been reduced from an aggregate of 240 months to 180 months while the guaranteed period had been raised from 72 years to 75 years.
This is coupled with the serious competition the Trust is expected to face from the second tier operators.
In the face of these major challenges, Mr Peprah said the trust can no longer venture into projects that do not yield enough returns that can help the Trust to be more sustainable.
He mentioned for instance the rental housing scheme of the Trust which had become an albatross on the Trust because of the refusal of the occupants to pay realistic rent to cover the cost of maintenance and the investments made into them and noted that the Trust had moved away from such terms to enable it to recover the cost of the investments.
Many occupants of SSNIT flats had always complained publicly about the intentions of the Trust to increase their rent and attempts to evict them have also not been forthcoming because of protests.
The Trust’s attempt to also sell outrightly, the flats to the occupants have also been met with agitations but the Chairman of the Board of SSNITdid not hide his feelings when he said that the sale of the flats would be revisited in due course.
The Director General of SSNIT, Dr Frank Odoom, also emphasised the need for the Trust to maintain at least positive 2.25 per cent real return on investments made per annum.
On growth of the fund, he said; “The total investments portfolio as of December 31, 2009, declined by 7.8 per cent from GH¢2,163.9 million in 2008 to GH¢1,994.47 million”.
He said over the past five years, the SSNIT Investment Portfolio has grown over 133.8 per cent from GH¢932.75 million in 2005 to GH¢1994.47 million in 2009, representing an annual growth of approximately 21 per cent per annum.
Dr Odoom further explained that the nominal return of investment portfolio for the year was impacted by what he described as the “challenging investment environment”.
“Compared to the previous year, the normal return decreased from positive 19.30 per cent in 2008 to 10.23 per cent in 2009. After accounting for inflation, the portfolio posted a real return of negative 7.60 per cent”, he added.
Dr Odoom who is an astute actuararian said listed equities component which was 30.8 per cent of the investment portfolio of the Trust suffered huge capital losses which outweighed the little gross dividend income, to the extent that the overall nominal return on the listed equity component of the portfolio posted a loss of GH¢233.75 million.
“It is worth mentioning that the real estate re-valuations are carried out triennially, the last one having been done in 2007”, he said.
On the outlook for 2010, Dr Odoom said there were indications that the adverse macroeconomic fundamentals, that is, interest rates, inflation rate, exchange rate among others, would persist till mid-year when they would start showing signs of recovery.
On capital market developments, he said about GH¢234 million was lost on the Trust’s investment in Ghana Stock Exchange (GSE)-listed equities, in fiscal year 2009.
Against this background, Dr Odoom said management would intensify monitoring of the Trust’s listed portfolio on a monthly basis, coming out with buy, sell or hold recommendations.
He bluntly admitted that the implementation of the new pension scheme and its attendant reduction in investible funds within the trust was real.