Assessing the Effect of Second Tier Fund Management on Social Security and National Insurance Trust (SSNIT) Pension Scheme

Abstract

Pension reforms in Ghana have been carried out over the years with the emphasis always on the benefits to be paid to the members of the scheme. Extant literature on the current three tier pension scheme in Ghana indicates much that attention has not been paid to the scheme’s sustainability and solvency as well as the financial viability of SSNIT. The study found to examine the extent to which the current reforms have affected the financial viability of SSNIT as an institution and also assesses which of the two pension laws of Ghana makes beneficiaries better off. The study adopts a mixed method which consist of both quantitative and qualitative methods. Primary data in the form of questionnaires and interviews that were gathered from pensioners and the actuary department of SSNIT on the new pension reforms. Secondary data was from SSNIT financial statement and other management reports. The descriptive statistics showed majority of the respondents indicated that the amount of pensions paid to them is not enough to enhance their living standards hence, not sustainable. The transfer of 5% contribution to second tier fund managers does not have any effect on SSNIT in the short term. Also, SSNIT beneficiaries are better off in receiving their benefits. This is because the index rate is greater than the inflation rate. It also concludes that the scheme has remained solvent over the period but it is close to reaching equilibrium where total income will be equal to total expenses. SSNIT is facing the challenge of a reduction in the amount of contributions received to 11%. The 11% will not be adequate for SSNIT. The respondent further explained that very soon what SSNIT will be getting in terms of contribution is just enough to pay benefits and as benefits is growing. The study recommends that education on the new pension scheme should be done as many contributors lack knowledge about the new scheme and how it functions. Proper assessment of the new pension reforms to ensure that SSNIT does not arrive at a deficit in the future.