THE NATIONAL PENSIONS AMENDMENT ACT, 2014 ACT 883 AND ITS IMPLICATIONS
WHY WAS THE NATIONAL PENSIONS ACT, 2008 (ACT 766) AMENDED?
On 31st December, 2014, Act 883, the National Pensions (Amendment) Act, passed by the Parliament of Ghana came into force. The amendment was made to achieve the following:
ACT 883 HAS AMENDED SECTION 60 OF THE PARENT ACT 766 as follows:
Why Age Reduction from 55 Years to 50 Years?
The Parent Act 766 provided that upon commencement of the Act in January, 2010 all members of the Social Security Scheme who were 55 years and above, were to be exempted from the application of Act 766.
For those who were 55 years and above, they will continue to pay 17.5% as contribution under the old PNDCL 247 and pension benefits will also be paid under the PNDC Law 247 wholly managed by SSNIT.
From 1st January, 2010 all members of the SSNIT Scheme who were aged 54 years and below became automatic members of the Act 766.
Under Act 766, SSNIT no longer pays the 25% lump sum but pays only monthly pension. SSNIT however is required by Act 766 to determine with NPRA based on actual assessment of the equivalence of 25% earned by every member as at the commencement of the Act 766 and paid as past credit.
Under Act 766, the 2nd Tier is responsible for the payment of the Lump Sum. Many of those who were close to the exemption age of 55 years from commencement of Act 766 applied to SSNIT for their pension. Their monthly pension was computed under Act 766 and they were also entitled to past credits.
Due to the fact that some of them did not make any contributions under the 2nd Tier, and even those who made contributions have also not made enough contributions, the lump sum they were entitled to, became much lower than the 25% lump sum they would have been entitled to if they had been paid under the PNDC Law 247.
Implications of the Reduction in Age Exemption
The Amendment Act therefore placed all those aged 50 years and above under the PNDC Law 247 and have their benefits computed under PNDC Law 247 (i.e. 25% lump sum and the monthly pension).
The 50 years and above contributors exempted under the Act 766 will also continue to pay 17.5% contributions to
SSNIT, i.e. Worker 5%, an Employer 12.5% of the basic salary of the worker.
Act 766 as amended will now apply to all those who were below 50 years as at 1stJanuary, 2010.
The Pensioners and workers who are exempt from the Act 766 by the amendment can still exercise an option to remain under Act 766.
The option created is necessary because of the differences in the minimum period to qualify under Act 766 (15 years or 180 months) and 240 months or 20 years under PNDC Law 247.
ACT 883 HAS AMENDED SECTION 77 OF ACT 766 AS FOLLOWS:
The principal enactment is amended in section 77 (a) by the substitution for “fifty-per centum” in subsection (2) of “thirty-seven and half per centum”; and (b) by the substitution for subsection (3) of “(3) Where a member works beyond the minimum contribution period the amount of pension payable shall be increased by 1.125 per centum for every additional twelve months worked up to a maximum of sixty per centum.”
Why Was The Formula For Computation Of Pension Also Amended?
There was an inadvertent error in the formula for computation of pensions as stated in the original Act 766.
The error was detected soon after Parliament passed Act 766 in December 2008. And only an Amendment Act could reverse the error.
Under PNDC Law 247, SSNIT pays both the 25% lump sum and monthly pension. For the determination of a member’s Pension Right, the minimum period of 20 years or 240 months contributions gives the member 50% pension right.
Every additional 12 months contribution gives the member 1.5% up to a maximum of 80%. The monthly accrual rate for the additional period of contribution is 1.5/12=0.125%
Under Act 766 the 25% lump sum and its accompanying contributions were ceded off from SSNIT to the 2nd Tier. SSNIT is therefore required to pay only the 75% residual pension. For this reason the Pension Right of a member under the 1st Tier of Act 766 cannot remain 100%, but 75%.
In other words you find 75% of the original 50% pension Right earned for the minimum period of contribution of 20 years. That is 75/100 times 50 which equals 37.5%.
So the amendment is to correct the formula for the computation of pensions to reflect 37.5% for 15 years or 180 months minimum contribution and 1.125% for every additional 12 months contributions up to a maximum of 60%.
The monthly accrual rate for the additional period of contribution is 0.09375%.
It is instructive to note that the wrong formula was never used to compute any contributor’s pension.
RELATIONSHIP BETWEEN COMPUTATION UNDER PNDCL 247 AND ACT 766/883 PNDCL 247 LINKAGE ACT 766/883
WHAT OTHER BENEFIT HAS BEEN INTRODUCED IN THE AMENDMENT ACT?
Act 883 introduced section 73A on payment of Benefit to a non-Ghanaian member as follows:
“A non-Ghanaian emigrant who has contributed to the SSNIT Scheme and is emigrating or leaving Ghana permanently shall be paid a lump sum benefit. Where the emigrating member qualifies for a pension, the present value of the member’s pension shall be paid as lump sum benefit. Where the emigrant member does not qualify for pension, a return of his contribution plus interest shall be paid as lump sum benefit.
Where the member does not qualify for pension, a return of contribution together with interest calculated at seventy-five per cent of the interest rate of the ninety-one day Government Treasury Bill shall be paid as lump sum benefit.” shall be paid as lump sum benefit”
QUALIFYING CONDITIONS FOR PAYMENT OF EMIGRATION BENEFIT UNDER THE NATIONAL PENSIONS (AMENDMENT) ACT, 2014 ACT 883
Procedure For Applying For Emigration Benefit
This procedure has been published already as follows:
A non-Ghanaian shall satisfy the following conditions for processing the benefits entitled to:
After satisfying all the above conditions listed in (1) and (4), SSNIT shall compute and promptly pay the benefit into the designated local Bank account of the member. All non-Ghanaian members who qualify for emigration benefit shall be paid in the local currency. However if the member wants transfer of benefit in a foreign account, member will bear the cost of exchange transfer.
DEMAND FROM SSNIT OFFICIALS FOR INFORMATION TO BE COMPILED WITHIN SEVEN DAYS
Act 883 amended section 91 of Act 766 to enable employers to provide relevant information to SSNIT upon demand within seven days as follows:
“(3) In the discharge of duties under this section, where an inspector requires an employer to produce documents related to appointment, attendance, wages of workers and contributions or liability of employers to contribute to the scheme or any other relevant document, the employer shall produce the documents within seven days of receipt of the request and the inspector would take copies of or extracts from the documents”