As Fund Managers, we have often advised individuals to take charge of their retirement and to plan activities for it. This, we keep saying and cannot emphasize enough. Now while we have often made the loudest noise about personal retirement planning, we believe in balancing it with the mandatory low hanging fruit – Tier 1 and Tier 2 – and encourage you to pay a bit more attention if you have not in the past.
What is the 3 Tiered Pension System?
The National Pension Act, 2008 (Act 766) mandates the creation of a new contributory three-tier pension system for Ghana comprising two mandatory schemes and a voluntary scheme, namely:
- A mandatory Basic National Social Security Scheme for the 1st tier to be managed by SSNIT;
- A mandatory Occupational Pension Scheme for the 2nd tier; and
- A voluntary Provident Fund Scheme/Group Personal Pension/Personal Pension Scheme for the 3rd tier.
The 2nd and 3rd tier are to be privately managed by approved Trustees with the assistance of Pension Fund Managers like Fidelity Securities and Custodians, mostly commercial banks.
As an employee, your employer is supposed to contribute a mandatory 13.00% of your gross salary into Tier 1 while facilitating the contribution of 5.50%, which is deducted from your salary into Tier 2. Tier 3, on the other hand, is voluntary and intended to serve as a personal pension scheme for all interested individuals.
What Should You Do?
As a first step to taking charge of your retirement, ensure your employers are paying your contributions every month. You can crosscheck this by visiting SSNIT offices as asking to see your statement for Tier 1. You can also engage your trustees for your Tier 2 statement.
Secondly, when you switch jobs, ensure to either transfer your Tier 2 funds to the Fund Managers of your current employer or at least make a conscious effort to keep track of all funds managers, with whom you have dealt. That way, you can fully track and enjoy your full benefit upon retirement.
Let us journey on to financial freedom!