New Pension Scheme under threat

A couple of years ago, a new pensions Act came into effect to guarantee workers better value and a comfortable retirement package. However, some serious challenges seem to be threatening to collapse the hitherto positive idea. Charles Benoni Okine reveals the frustrations of players in the industry.

THE unexplained delays in registering the pensions/provident schemes of companies certified to manage the second and third tiers under the New Pensions Act are seriously threatening the implementation of the Act.
The Graphic Business has gathered that most of the companies which were fully set up about three years ago in readiness for the implementation of the new Act are now running out of funds they heavily invested in the business.
These companies may not be in the position to run the schemes if the National Pensions Regulatory Authority (NPRA) continues to drag its feet.
The NPRA set three deadlines for the licensing of the pension schemes of companies but have had to postpone it three times without concrete reason. The first deadline of April 30, 2012 was later changed to June, 2012 and subsequently to August 31, 2012. The August 31 deadline is past, without a single pension/provident fund scheme licensed.
The situation is creating serious anxiety among the players in the industry who claim that neighbouring Nigeria used only a month to transition after a similar reform five years ago, while uncertainty still lingered after three years in the case of Ghana.
Some of the scheme’s managers’ in-waiting told the Graphic Business on grounds of anonymity that a series of meetings held with the NPRA to find a solution to the problem had proven futile and noted that the authority seemed.
“The fate of the pension reform hangs in the balance and therefore needs serious intervention to keep the dream alive”, one of the managers said.

Temporary Pensions Fund
Aside the licensing of pension schemes, he said the Temporary Pensions Fund (TPF) had to be disbursed to trustees while the past pension credit earned by workers on the repealed schemes (SSNIT, Universities Superannuation, CAP 30 and Armed Forces Schemes) had to be crystalised.
He said there was the need for all existing privately managed schemes to be harmonised because “interestingly, we are still at step one after three years”.  
To begin the implementation, he said the NPRA set up a Temporary Pension Fund (TPF) in January 2010 to provisionally administer Tier 2 pending the licensing of Trustees.
Employers have, since January 2010, been remitting  five per cent of their employees’ salaries to the TPF, however, “it is unfortunate that as we speak, we all do not know how much has accrued and the statements have not been made public for the contributors to know how much has accrued,” he said.
Under the law, there are several companies and institutions which wish to register their voluntary provident fund schemes in order to enjoy the tax reliefs granted under the pension law but unfortunately, with the situation now, tax reliefs toward the voluntary Tier 3 cannot be enjoyed until schemes were licensed by the NPRA.
Investment losses
They said 15 companies have been licensed by the NPRA to administer pension schemes. These firms have hired staff - some of whom have been paid salaries for nearly three years without a single in-flow of revenue.
The continuous employment of these staff is obviously threatened. Additionally, Trustee firms have made huge investments in ICT and other infrastructure to meet the very stringent requirements set by the NPRA.
Thus, legitimate investments made by Corporate Trustees risk going down the drain, given that there was absolutely no end in sight vis-à-vis the licensing of pension schemes and hence the generation of revenues.
All of these Corporate Trustees risk collapsing as they are unable to generate revenues until pension schemes are approved. Their invested capitals are getting depleted.
The collapse of these companies will result in more than 1,000 people losing their jobs with obvious repercussions on the graduate unemployment situation not to mention financial losses facing their shareholders.
Lack of accountability in the management of TPF
The TPF was set up to achieve a wholesale transition to the second tier. This arrangement was not intended to last more than one year but, three years after it was set up, the NPRA is still running the TPF under transitional arrangements. It is natural to expect the NPRA, being the regulator of pensions, to set a good example in the area of governance and disclosure, but this is yet to happened.
Currently, contributors and employers are in the dark as to how the fund is invested and the returns earned on the investments. No financial accounts have been prepared. Employers have no confirmation of the status of their employees’ contributions and information flow to interested persons is non-existent.
They said the administrative structures designed to track the financial performance of the fund and the contributions of individual participants are also in doubt, while “the untidy administrative design of the TPF has made it difficult for beneficiaries of deceased workers to access their benefits”.
They pointed out that for a scheme covering more than 850,000 workers, caution was expected and any mismanagement will create panic and anxiety among workers and employers and, therefore, urgent remedial measures were required and immediately too.
The companies said “the transitional arrangement was designed to last one year (January 2010 to January 2011); We are, however, about to finish the third full year of the transition, with absolutely no end in sight”.
They reiterated that under the transitional arrangement, the NPRA was to open a TPF with the Bank of Ghana. Accrued contributions in the TPF were meant to be transferred from the TPF once pension schemes, run by approved Tiers 2 and 3 Trustees, had been licensed by the NPRA.
“Since we are still operating under the transition, NPRA is effectively the Fund Manager of that TPF; The NPRA has yet to render a single account on the TPF to employers and contributors in almost three years”, they said.
Meanwhile, the attention of the NPRA board has been drawn to the concerns of the companies and it has indicated its intention to respond to the issues one after the other during the week.