Actuarial valuation of the Social Security and National Insurance Trust schemes as at 31 December 2020

BACKGROUND AND JUSTIFICATION THE SOCIAL SECURITY AND NATIONAL INSURANCE TRUST The Social Security and National Insurance Trust (SSNIT) is a statutory public trust charged with the administration of the national pension scheme of Ghana. The primary responsibility of the institution is to replace part of lost income due to old age, disability or death. The national pension scheme was established by the SSNIT under the Social Security Act of 1991 (PNDCL 247) and reviewed under the National Pensions Act of 2008 (Act 766). Under the Act 766, a three-tier national pension scheme was established with effect from 1 January 2010. In addition, as a result of the adoption of the Act 766, the national pension scheme established under the Social Security Act of 1991 was closed to new members from 1 January 2010, with those aged under 55 automatically becoming members of the scheme set up under the Act 766. Members aged 55 and over were given the option to remain covered under the previous scheme or to join the new scheme. Following the adoption of the National Pensions Act of 2014 (Act 883), the age of 55 was reduced to 50. The pension system established by the Act 766 has a three-tier structure, comprising of two mandatory schemes (the first and the second tiers) and a voluntary scheme (the third tier). The schemes introduced under the PNDCL 247 and the Act 766 are not run separately – that is, there is no allocation of the funds between the two schemes. A National Pensions Regulatory Authority (NPRA) has been established to regulate all the pensions schemes defined under the Act 766. Under the Act 766, the SSNIT Scheme has a board of trustees which reports to the NPRA. The Section 53(1) of the Act 766 states that the SSNIT shall obtain actuarial valuations from an external actuary at intervals of not more than three years. In compliance with Section 53(1) of the Act 766, the SSNIT has requested the International Labour Office (ILO) to undertake the actuarial valuation of the national pension schemes set under the PNDCL 247 and the first tier of Act 766 as at 31 December 2020. ACT 766 FIRST TIER Mandatory basic defined benefit scheme providing 75 per cent of the benefits provided by the national pension scheme set under the PNDCL 247. SECOND TIER Mandatory and privately-managed occupational defined contribution pension schemes, paying mainly lump-sum benefits. The second tier also allow members to purchase an annuity. The contribution rate in the second tier is set at 5 per cent of insurable earnings. THIRD TIER Voluntary and privately-managed provident funds and personal savings. The third tier is supported by tax incentives. 5 RECOMMENDATIONS FROM THE LAST ACTUARIAL VALUATION The last actuarial valuation of the SSNIT schemes was carried out by the ILO as at 31 December 2017. The main recommendation from this actuarial valuation report was to schedule increases of contribution rate increases according to a funding policy. Other recommendations were: • Include social allowances in the insurable earnings used as reference for the purpose of calculating contributions and benefits, on a prospective basis; • Introduce a pension payment instead of a lump sum when a member dies, so that to be in accordance with ILO Convention No. 102; • To improve the financial sustainability of the SSNIT, stop adjusting pensions according to salary growth and instead adjust to inflation. Also, implement rules in the funding policy to deal with situations where salary increases are lower than inflation; • Change the financial reporting from a cash to an accrual basis. Although there is currently no policy developments, all the recommendations from the last actuarial valuation are receiving SSNIT management attention

Project symbol

GHA/21/02/GHA

Admin unit

SOCPRO

Start date

11/02/2022

End date

31/10/2023

Total allocation

184155

Total expenditure

Status

Closed

178989

Development Partners

Ghana, Social Security and National Insurance Trust

Country/Countries

Ghana

Outcomes

Outcome 7: Universal social protection