Business News of Friday, 9 October 2020
The Social Security and National Insurance Trust (SSNIT) has mounted a spirited defense of the existing pension scheme, governed by Act 766, stating that, “pensioners have not been made worse off under the three-tier pension scheme (Act 766).”
According to the Trust, “the monthly pension paid under Act 766 is better than the residual pension paid under PNDCL 247.”
It will be recalled that the Trades Union Congress (TUC) in August this year, appealed personally to President Nana Akufo-Addo to intervene and correct what it called the “injustice and unfairness in the implementation of the three-tier pension scheme.”
The TUC had earlier issued a statement saying “many workers have retired on the three-tier pension scheme with harrowing experiences. Pension Payment Statements we have gathered from some of our members who retired in 2020 show that they are worse-off because their lump-sum benefits are far lower than what they would have received if they had retired under PNDC Law 247.”
According to the TUC, “This is unfair and unjustifiable. The pension reforms that gave birth to the current pension system was premised on the idea of enhancing retirement income for workers.”
The TUC wondered why workers, who had retired after more than three decades of dedicated service to the country, “would receive such paltry sums as lump-sum benefit. this is injustice social partners should not allow to continue.”
But in an email response to questions posed by Business Finder on TUC’s claims, SSNIT insisted that the pension reforms had brought better overall benefits to workers.
The Trust explained that it took a shorter period of contributions to qualify for a pension under Act 766 as compared to PNDCL 247.
“Under Act 766, with 15years or 180 months of contributions, one qualifies to receive 37.5 per cent of the average of their three years’ best salaries as pension and the lump sum paid by the second tier.
Whereas, workers needed 20 years or 240 months’ contributions to qualify for 50 percent of the average of their three years’ best salaries as whole pension. If such a person opts for lump sum, then, the residual pension will be 37.5 percent of the average of their three years’ best salaries on which contributions were paid,” the Trust explained.
SSNIT explained further that, “ for two people, one retiring under PNDCL 247 and the other under Act 766, both with 20years’ contribution, the one retiring under PNDCL 247 gets a residual pension of 37.5 percent (of average of their three years’ best salaries) and the other under Act 766 gets 43.125 percent as pension.
In the same vein, under Act 766, workers qualify for 60 per cent of the average of their three years’ best salaries as pension after contributing for 35years whilst retirees under PNDCL 247 get 52.5 per cent after contributing for 35years. It is therefore inaccurate to suggest that pensions under PNDCL 247 are better than Act 766. The contrary is actually the case.”
Past Credit not equivalent to 25% Lump Sum
SSNIT noted that the comparison being made between Past Credit payment and lump sum payment under PNDCL 247 was ill-informed.
According to the Trust, the comparison had no basis, “because the 25 percent lump sum paid under PNDCL 247 does not have its equivalence as the Past Credit. One has to add the Past Credit to the amount accrued under Tier-2 in order to arrive at the full lump sum benefit under Act 766. Therefore, to compare the Past Credit paid by SSNIT to the Lump sum that used to be paid by SSNIT is erroneous, since the two are not the same.”
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