The Social Security and National Insurance Trust (SSNIT) is a pillar of Ghana’s social security framework, established in 1972 under the NRC Decree 127. As the administrator of the Basic National Social Security Scheme, SSNIT plays a pivotal role in providing income security for workers through a range of benefits, including old age pensions, invalidity payments, and survivors’ benefits.
Operating under the National Pensions Act, 2008 (Act 766), SSNIT is responsible for managing the first tier of Ghana’s three-tier pension system, which requires both employers and employees to contribute a combined total of 19% of salaries to the fund.
With over 1.6 million active members and more than 226,000 pensioners, SSNIT is tasked with ensuring that retirees receive adequate financial support in their later years. However, the trust faces significant challenges, particularly regarding timely government contributions, which are essential for maintaining the fund’s sustainability and ability to generate returns.
In an insightful interview with Dr. Daniel Seddoh, the former CEO of the National Pensions Regulatory Authority (NPRA), the crucial role of timely government contributions to SSNIT was highlighted.
Dr. Seddoh pointed out that regular and on-time contributions are vital for the proper management and long-term sustainability of Ghana’s pension system. Reflecting on the previous CAP 30 pension scheme, which operated on a pay-as-you-go basis, he noted that under this system, funds for pension payments were drawn from the annual government budget at the time of retirement.
This model led to significant delays in payment, as the government often struggled to allocate the necessary funds to meet its obligations.
Recognizing the shortcomings of the CAP 30 scheme, the government transitioned to a partially funded pension system through SSNIT. The former CEO explained that this shift was aimed at ensuring that contributions were made regularly, allowing SSNIT to invest these funds and generate returns to pay future pensions. However, he pointed out that the system was designed to be only partially funded, relying on a large number of contributors to sustain it.
Moreover, Dr. Seddoh stressed that timely government contributions are crucial for SSNIT to make prudent investment decisions. Delays in payments not only hinder the fund’s ability to grow but also erode the purchasing power of pension benefits due to inflation.
He stated, “the biggest enemy of pension is inflation,” emphasizing that if contributions are not made on time, the value of the benefits received by retirees diminishes over time.
Furthermore, he highlighted that the government, as the primary regulator and initiator of pension reforms, must demonstrate its commitment to the system by fulfilling its contribution obligations. “If the government does not pay or pays late, it sends a message that it does not believe in the pension scheme,” he remarked. This lack of confidence can further exacerbate the challenges faced by the pension system, ultimately affecting the financial security of retirees.
The former CEO urged all stakeholders, including the government, employers, and employees, to prioritize timely contributions to create a robust pension system that can withstand economic fluctuations and provide real value to retirees.
