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BUSINESS ENQUIRY
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Can I use my accrued benefits in a pension scheme as collateral to secure a loan?

No; under the National Pensions Act, 2008 (Act 766), a pension scheme shall have rules that prevent the assignment of benefits. However, a scheme (mandatory occupational pension scheme, provident fund or personal pension scheme) may allow a member to use that member’s benefit to secure a mortgage for the acquisition of a primary residence.

Does a worker enjoy any tax reliefs for contributing under the National Pensions Act?

Yes; a contributor under the National Pensions Act enjoys the following tax benefits:

a) An employer or employee shall not pay income tax in respect of contributions to the basic national social security scheme and mandatory occupational pension schemes

b) Contributions not exceeding sixteen and one half per centum of a contributor’s monthly income, made by either a contributor or the contributor’s employer or both to a provident fund or personal pension scheme shall, be treated as tax deductible income, for the purpose of income tax for the contributor and the contributor’s employer to the extent of their respective contributions

c) Tax is not payable on the benefits received under Act 766

d) Investment income including capital gains from the investment of scheme funds shall for the purposes of income tax be treated as deductible income

e) A withdrawal of all or part of a contributor’s accrued benefits under a provident fund or personal pension scheme
On or after retirement shall be tax exempt
Shall be subject to the appropriate income tax for contributors in the formal sector before ten years of contribution and before retirement

Can an Employer choose its own pension fund manager and custodian?

Yes; an employer is permitted to choose its own pension fund manager and custodian ONLY if the scheme is an employer-sponsored scheme. However, if the scheme is a master trust scheme, then the corporate trustee has the responsibility of choosing the pension fund managers and custodian.

When can a worker withdraw his/her accrued benefits under the third tier?

A worker may withdraw his/her accrued benefits under the third tier under the following conditions:

a) A member who has attained the retirement age is entitled to the entire accrued benefits in the scheme in a lump sum

b) A member who has not attained retirement age may withdraw all or part of the member’s accrued benefits from a scheme
After ten years from the date of first contribution in the case of the provident fund or personal pension scheme for contributors in the formal sector
After five years from the date of first contribution in the case of personal pension scheme for contributors in the informal sector
Following certification by a medical board that the contributor is incapable of any normal gainful employment by virtue of physical or mental disability

c) The beneficiaries of the estate of a deceased contributor may withdraw the accrued benefits of the deceased from the scheme

Can an individual employee select his or her trustee to manage the 2nd tier mandatory occupational pension scheme?

No; it is the responsibility of the employer to select the trustee to manage the 2nd tier mandatory occupational pension scheme on behalf of its workers

What is a master trust scheme?

It is a multiple-employer scheme that allows different employers and their workers to join and is normally administered by a corporate trustee in line with the scheme rules approved by NPRA.

What happens to the accrued benefits of a worker who ceases to be an employee?

A member of a scheme who ceases to be an employee shall elect to have the member’s accrued benefits transferred to another scheme in accordance with the regulations of the scheme

When can a worker withdraw his/her accrued benefits under the second tier?

A worker may withdraw his/her accrued benefits under the second tier under the following conditions:

a) A member of the scheme who has attained retirement age is entitled to the entire accrued benefits in the scheme in a lump sum

b) A member who has not attained the retirement age but has attained the age of fifty years and is not employed or self employed is entitled to the entire accrued benefits in the scheme in a lump sum

c) A person who is not a citizen of Ghana who does not satisfy the qualifying conditions for a benefit of a scheme but desires to emigrate permanently from the country may be entitled to the entire accrued benefits in the scheme in a lump sum

d) A member of a scheme who is certified by a competent medical board to be incapable of any normal gainful employment by virtue of physical or mental disability is entitled to the entire accrued benefits in the scheme in a lump sum

What is a trust?

A Trust is an arrangement involving normally three parties of which one party entrusts the property/assets to another party to be transferred to the third party (beneficiary) at a point in time or a specified period.

What is an occupational pension scheme?

It is a pension scheme that is work-based, established under a trust which provides benefits based on a defined contribution formula in the form of a lump sum that is normally payable on termination of service, death or retirement of a worker

What is the qualifying age to join the national basic social security scheme?

The minimum age at which a person may join the national basic social security scheme is fifteen years and the maximum age is forty-five.

Who is a trustee?

It is an individual or corporate entity that holds property/assets on behalf of another person normally known as the beneficiary.

How much is a worker required to contribute to the scheme?

Contributions to the three-tier pension scheme are as follows:

a) An employer of an establishment shall deduct from the salary of every worker in the establishment immediately at the end of the month, a worker’s contribution of an amount equal to five and half per centum (5.5%) of the worker’s salary for the period, irrespective of whether or not the salary is actually paid to the worker

b) An employer of an establishment shall pay for each month in respect of each worker, an employer’s contribution of an amount equal to thirteen per centum (13.0%) of the worker’s salary during the month

c) Out of the total contribution of eighteen and a half per centum (18.5%) an employer shall within fourteen days from the end of each month transfer the following remittances to the mandatory schemes of each worker
Thirteen and half per centum (13.5%) to the first tier mandatory basic national social security scheme; and
Five per centum (5%) to the second tier mandatory occupational pension scheme

d) Out of the total contributions of thirteen and half per centum transferred to the first tier mandatory basic national social security scheme, two and half per centum (2.5%) shall be deducted and transferred to the National Health Insurance Fund

e) The minimum contribution is eighteen and half per centum of the approved monthly equivalent of the national daily minimum wage

f) Total contributions by employer and employee to Tier 3 of the three-tier pension scheme are tax deductible up to sixteen and a half per centum (16.5%) of employee’s gross month salary

How is the contributory three-tier pension scheme managed?

The contributory three-tier pension scheme is managed as follows:

a) the first tier basic national social security scheme is managed by a restructured SSNIT
b) the second tier occupational pension scheme and third tier provident fund and personal pension schemes are managed by approved trustees licensed by NPRA
c) Approved trustees are assisted by Pension Fund managers and Custodians licensed by the Securities & Exchange Commission and registered by NPRA

What is the contributory three-tier pension scheme?

The contributory three-tier pension scheme is the new pension scheme that was introduced into the country following the promulgation of the National Pensions Act, 2008 (Act 766). The three-tier pension scheme consist of

a) A mandatory basic national social security scheme;
b) A mandatory fully funded and privately managed occupational pension scheme; and
c) A voluntary fully funded and privately managed provident fund and personal pension scheme

What is the National Pensions Act?

The National Pensions Act is the seven hundred and sixty-sixth Act (Act 766) of the Parliament of the Republic of Ghana that was passed in 2008. The Act provides for pension reform in the country by the introduction of a contributory three-tier pension scheme; the establishment of a National Pensions Regulatory Authority (NPRA) to oversee the administration and management of registered pension schemes and trustees of registered schemes, the establishment of a Social Security and National Insurance Trust (SSNIT) to manage the basic national social security scheme to cater for the first tier of the contributory three-tier scheme, and to provide for related matters.

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