PENSION DIARY

Are you a SSNIT contributor?

Is any relation of yours a SSNIT contributor?

Have you ever contributed to SSNIT before joining Superannuation?

If your answer is yes to 1 and 2, then kindly answer the following questions:

How many pension rights have you or your relation earned so far?

How many pension rights will you or your relation earn before you go on retirement?

If your answer is yes to 3, then kindly answer the following question:

Are you entitled to any benefit under SSNIT?

What type of benefit are you entitled to?

How much are you entitled to?

 

For many of us, these questions are kind of alien to us. Why should I think of my pension entitlements whiles I have more years to retire. Birth is a signal of death (Hon. Haruna Iddrisu).  In that case our appointment letters are indicators of our retirement letters. We therefore ought to start planning our pension right from the beginning of our working lives. Knowing how much we are worth with SSNIT when we go on retirement is a vital aspect of our pension planning. Knowledge of our investment with SSNIT and the kind of lifestyle we expect during our retirement will inform us on how much additional pension we have to do to live our dream retirement lives.

 

Social Security

Known as the Basic National Social Security Scheme (BNSSS) and publicly managed by the Social Security and National Insurance Trust (SSNIT) is a defined Benefit Pension Scheme that pays pension to contributors who contribute into the scheme. Currently, there are two laws in operation regarding pensions, the PNDC Law 247 and the New National Pensions Act 2008 (Act 766). All contributors who were 50 years upward as at 2010 are covered under PNDC Law 247 and those who were below 50 years as at 2010 are covered under Act 766.

Benefits available to contributors under the scheme

Old-age Pension which is based on the average of the best three years of a Contributor’s salary, and paid on monthly basis under Act 766 (*25% Lump Sum paid – PNDC Law 247);

           

A Survivors Benefit (Lump Sum);

            An  Invalidity Benefit; and

            Full Refund (Old Age Retirement Lump Sum)

            Emigration Benefit

Old-age pension

This is a benefit paid to contributors who successfully retire at age 60 (55 for those in hazardous employment like underground miners) or voluntary at age 55.

 

To qualify for pension benefits, the Old-age Pension Benefit requires a minimum contribution period of 15 years (or 180 months) in aggregate under Act 766  (*20 years or 240 months – PNDC Law 247)

Survivors Benefit (Lump Sum)

This is a lump sum payment made to a deceased contributor’s surviving dependents.

 

To qualify for this benefit;

            The contributor must have died with proof of his/her death

            The contributor must die before attaining age 75 under Act 766 (*72 under PNDC Law      

             247)

 

Invalidity Benefit

This is pension benefit paid to contributors who suffer ailment in the course of active service before attaining age 60.

            Condition to qualify for pension benefits on grounds of invalidity is for the contributor to declare on medical grounds as incapable.

            The contributor must have contributed for a period of not less than 12 months within the last 36 months before the occurrence of the invalidity

 

Full Refund (Old Age Retirement Lump Sum)

This benefit is paid to contributors who do not meet the minimum contribution period of 180 months under Act 766 (*240 months in PNDC L aw 247) or contributors who leave the scheme before age 60 or voluntary retirement of 55. Full refund of total contribution plus accrued interest at 75% of prevailing Treasury Bill rate. (*50% - PNDC Law 247) is paid when the contributor attains age 55 and upon application.

Emigration Benefit

This benefit is paid to foreign nationals who come to work in Ghana. At the time that they are leaving the country to resettle in their country, their contributions plus accrued interest is paid to them on application even if they have not attained age 55 as in the case of a national of Ghana.

Pension Right

Pension Right is earned by contributors who are entitled to monthly pension payments and not contributors who are entitled to only Lump Sum payments. It is the percentage units that a contributor accumulates for every month contribution into a pension fund. The magnitude of our pension benefit depends on the Pension Right that we accrue. Under the Basic National Social Security Scheme (popularly known as SSNIT);

  2.5% Pension Right accrues for every year worked for the first 15 years (180 months) of working life under Act 766 (*for the first 20 years or 240 months – PNDC Law 247).

 1.125% Pension Right accrues for each additional year worked after 15 years and truncates at Maximum of 60% under Act 766 (*1.5% for each additional year and truncates at 80% - PNDC Law 247)

Note: Minimum pegged at 37.5% and Maximum at 60% under Act 766 (*50% Minimum and 80% Maximum – PNDC Law 247). This means that no Pension Right is earned beyond 35 years working life under Act 766 (*Beyond 40 years – PNDC Law 247).

Pension Right Calculator

New Pensions Act 2008 (Act 766)

Pension Right=37.5%+([250-180]*[(1.125%)/12])

Old Pensions Law (PNDC Law 247)

Pension Right=50%+([250-240]*[(1.5%)/12])

Invalidity Pension Right

            Where the member has contributed for a period not less than 180 months under Act 766, the member shall be entitled to a pension right (or pension credit) equivalent to that of Old age retirement pension of 60% (*240 months under PNDC Law 247 is entitled to pension right of 80%)

            Where the member does not satisfy the minimum contribution period of 180 months under Act 766, the member shall be given a pension right of 37.5%. (*under PNDC Law 247 is entitled to pension right of 50%)

            Where a person is subsequently certified by the SSNIT Medical Board to have fully recovered and that person has not attained the compulsory retirement age of 60 years, that person may rejoin the Scheme

 

Now let us come to what matters most. The money zone.

Pension Calculator under Act 766

Annual Pension=Avg of 3 Best Years^' Annual Basic Salary * Pension Right Earned

Where

Avg of 3 Best Years^' Annual Basic Salary=(Annual Salary 1+Annual Salary 2+Annual Salary 3)/3

Monthly Pension =(Annual Pension)/12

 

Under PNDC Law 247

Annual Pension=Avg of 3 Best Years^' Annual Basic Salary * Pension Right Earned

 

Where

Avg of 3 Best Years^' Annual Basic Salary=(Annual Salary 1+Annual Salary 2+Annual Salary 3)/3

Monthly Pension =(Annual Pension)/12

Residual Pension=75% * Monthly Pension

25% Lump Sum=25% * Monthly Pension*Annuity Factor determined by SSNIT

***Worthy of note: those under Act 766 are not entitled to 25% Lump Sum from SSNIT. They entitled to a Lump Sum payment under Tier 2

 

Old-Age Pension Calculation Example

A member retires at age 60 and has contributed 250 month with the following three best annual salaries:

            GHS60,000

            GHS58,000

            GHS44,000

 

How much is the member’s pension benefit assuming he/she retires under?

            PNDC Law 247

            Act 766

 

Solution under PNDC Law 247

Avg of 3 Best Years^' Annual Basic Salary=(60,000+58,000+44,000)/3

Avg of 3 Best Years^' Annual Basic Salary=GHS54,000

Pension Right=50 %+([250-240]*[(1.5%)/12])

Pension Right=51.25%

 

Annual Pension=51.25%*GHS54,000

Annual Pension=GHS27,675

Monthly Pension=GHS27,675/12

Monthly Pension=GHS2,306.25

Residual Monthly Pension=GHS2,306.25*75%

Residual Monthly Pension=GHS1,729.69

25% Lump Sum=GHS2,306.25*25%*83.6765

25% Lump Sum=GHS44,244.75

 

Solution under Act 766

Avg of 3 Best Years^' Annual Basic Salary=(60,000+58,000+44,000)/3

Avg of 3 Best Years^' Annual Basic Salary=GHS54,000

Pension Right=37.5%+([250-180]*[(1.125%)/12])

Pension Right=44.06%

Annual Pension=44.06%*GHS54, 000

Annual Pension=GHS23, 792.40

Monthly Pension=GHS23, 792.40/12

Monthly Pension=GHS1,982.70

 

Early Retirement

A contributor can opt for voluntary retirement from age 55 through to 59 subject to a Reduced Pension. Pension benefit accruing to Early Retirement is reduced by Early Retirement Reduction Factor. The table is attached as appendix.

 

Early Retirement Pension Calculation Example

A member retires at age 56 year 2 months and has contributed 250 month with the following three best annual salaries:

            GHS60,000

            GHS58,000

            GHS44,000

 

Calculate the member’s pension benefits assuming he retires under

            PNDC Law 247

            Act 766

 

Solution under PNDC Law 247

 

Avg of 3 Best Years^' Annual Basic Salary=(60,000+58,000+44,000)/3

Avg of 3 Best Years^' Annual Basic Salary=GHS54,000

Pension Right=50%+([250-240]*[(1.5%)/12])

Pension Right=51.25%

Annual Pension=51.25%*GHS54,000

Annual Pension=GHS27,675

Monthly Pension=GHS27,675/12

Monthly Pension=GHS2,306.25

Residual Monthly Pension=GHS2,306.25*75%*0.6875

Residual Monthly Pension=GHS1,189.16

25% Lump Sum=GHS2,306.25*25%*83.6765*0.6875

25% Lump Sum=GHS30,418.27

 

Solution under Act 766

Avg of 3 Best Years^' Annual Basic Salary=(60,000+58,000+44,000)/3

Avg of 3 Best Years^' Annual Basic Salary=GHS54,000

Pension Right=37.5%+([250-180]*[(1.125%)/12])

Pension Right=44.06%

Annual Pension=44.06%*GHS54,000

Annual Pension=GHS23,792.40

Monthly Pension=[GHS23,792.40/12]*0.6875

Monthly Pension=GHS1,363.11 

Appendix

Early Retirement Reduction Factor Table           

	Additional Months
Years	Age	0	1	2	3	4	5	6	7	8	9	10	11
	55	0.6000	0.6063	0.6125	0.6188	0.6250	0.6313	0.6375	0.6438	0.6500	0.6563	0.6625	0.6688
	56	0.6750	0.6813	0.6875	0.6938	0.7000	0.7063	0.7125	0.7188	0.7250	0.7313	0.7375	0.74375
	57	0.7500	0.7562	0.7625	0.7687	0.7750	0.7812	0.7875	0.7937	0.8000	0.8062	0.8125	0.81875
	58	0.8250	0.8312	0.8375	0.8437	0.8500	0.8562	0.8625	0.8687	0.8750	0.8812	0.8875	0.89375
	59	0.9000	0.9083	0.9167	0.9250	0.9333	0.9417	0.9500	0.9583	0.9667	0.9750	0.9833	0.9917
	60 and above	1.0000