SSNIT Tier 2 Contribution. What Is It? All you Need to Know!


SSNIT Tier 2 Contribution. What Is It?

Many employees and employers do contribute and invest in SSNIT but regrettably, very few people know a lot about the organization; its history, its mandate and why it even exists. 

It is not enough to invest in SSNIT, you have to know what the organization stands for. You have to know their core duties and responsibilities. 

There is more to SSNIT than most people know of. And in this article, we will open your eyes to the many facts and truths about SSNIT you possibly don’t know. 

We will walk you through the organization’s history, its tier 2 contribution and other relevant topics to keep you informed on issues regarding SSNIT. 

You can’t just invest in SSNIT, you have to know more about the organization. Join me and let’s enter the buildings of SSNIT. 

Table of Contents

Brief History of SSNIT

The Trust was founded under NRCD 127 in 1972 to manage the National Social Security Scheme. Before 1972, the Scheme was jointly managed by the then Pension Department and the State Insurance Corporation.  

The Trust managed the Social Security Scheme as a Provident Fund Scheme until it was converted into a Social Insurance Pension Scheme governed by PNDC law 247 in 1991. 

Ghana’s pension scheme was reformed by a Parliamentary Act, (Act 766 of 2008) and implemented in January 2010 to replace all pension schemes in Ghana (including Cap 30). In 2014, the National Pensions (Amendment) Act 883 was passed to amend some of the contents of Act 766.

What Are The Responsibilities of SSNIT?

The Social Security and National Insurance Trust (SSNIT) is a statutory public Trust given the mandate to manage Ghana’s Basic National Social Security Scheme in accordance with the National Pensions Act, 2008 Act 766. 

Its mission is to cater to the First Tier of the Three-Tier Pension Scheme. The Trust is currently the largest non-bank financial institution in Ghana.

The main responsibility of the Trust is to replace part of the lost income of Ghanaian workers due to Old Age, Invalidity, or Death of a member where family members or dependants receive lump sum payment. It is also used to pay emigration benefits to a non-Ghanaian member who decides to leave Ghana permanently.

As of January 2021, the Pension Scheme as managed by SSNIT has more than 1.6 million active members, and over 226,000 regular pensioners who receive monthly pensions provided by SSNIT.

Core Functions of SSNIT

Their core functions are to:

  1. Collect contributions
  2. Manage records on members
  3. Invest the funds of the Scheme
  4. Register employers and workers
  5. Process and pay benefits to eligible members and nominated dependents.

Who Is Responsible for Overseeing The Day To Day Management of SSNIT?

The day-to-day management of the Trust is led by the Director-General, assisted by three (3) abled Deputy Director Generals (DDGs).

Seven (7) General Managers in charge of Investment and Development (IDD), General Counsel (GC), Finance, Operations, Administration and Human Resources (ADMIN/HR), Management Information Systems (MIS) and Benefits.  Other duties under the Directorate include the Chief Actuary, the Chief Internal Auditor, the Company Secretary and the Corporate Affairs Manager.

How Does SSNIT Operate?

SSNIT has a decentralized operational system consisting of the Area, the Branch, the Day Offices and an Agency. An Operations Coordinator at the Head Office coordinates all operational activities and reports to the General Manager, Operations.

Additionally, there are eight (8) Area Offices, fifty-one (51) Branches, twenty-three (23) Day Offices and an Agency all over the country.

What Are The Activities of The Branches?

The activities of the branches include:

  • The registration of employers and employees
  • Collecting and managing data on employers and employees
  • Assessment of establishments and collecting of contributions
  • Sharing of contributor’s statement of accounts
  • Assembling, processing and vetting of claim documents as well as payment of benefits
  • Processing Student Loan Repayment
  • Public Education on SSNIT Operations

Branches and Area Offices

The Area Offices supervises the Branches and carry out the following activities:

  • Co-ordinate operational activities between the Branches and Operations Coordinator at the Head Office
  • Take legal action against defaulting employers
  • Sort out accounting returns and reports from the Branches under them.
  • Organize Public Education on SSNIT Operations.

The Basic National Pension Scheme (TIER-1)

National Pension Act (2008) Act 766

The National Pension Act 766 makes provision for a contributory 3-Tier Pension Scheme, and the establishment of a National Pensions Regulatory Authority (NPRA) to supervise the administration and management of the Pension Schemes. 

According to the Act, SSNIT is to manage the Basic National Social Security Scheme, known as the first tier of the three-tier contributory scheme.

The other Tiers of the National Pensions Scheme are:

  • Tier 2 – An obligatory fully-funded and privately managed occupational scheme.
  • Tier 3 – A voluntary fully-funded and privately managed Provident Fund and Personal Pension Plan.

Features of Act 766

Mandatory for all workers in the formal sector and optional for self-employed.

  • First Tier – An obligatory basic contributory Social Security Scheme managed by SSNIT.
  • Second Tier – An obligatory fully-funded and privately managed occupational scheme.
  • Third Tier – A voluntary fully-funded and privately managed provident fund and personal pension plan.

Contribution Rates under the Social Security Scheme (Tier 1)

  • Employer – 13.0% from worker basic salary, Worker – 5.5% from workers basic salary, Total – 18.5%
  • The employer remits 13.5% out of the 18.5% within 14 days of the subsequent month to SSNIT. 5% is remitted to the Second-Tier Mandatory Occupational Scheme.
  • Consequently, SSNIT also gives 2.5% out of the 13.5% to the National Health Insurance Authority (NHIA) for the member’s Health Insurance.
  • SSNIT successfully withholds 11% for the administration of Tier 1.
  • The Entry Age of joining the scheme– 15 years (minimum) and 45 years (maximum) only for new entrants (age 45+ to enter mandatory 2nd tier).
  • Age Exemption – 55 years and above exempted (option to join)
  • Minimum and Maximum contributions indicated and reviewed periodically.
  • Investment of Funds – investment policy, external investments permitted.

Benefits & Qualification Conditions

Four (4) Benefits

  1. Superannuation Pension
  2. Invalidity Pension
  3. Survivors Lump Sum
  4. Emigration Benefit

Qualifying Conditions

  • The qualifying period has been reduced from 240 months (20 years) to 180 months (15 years)
  • The guaranteed Survivors benefits payment period has been increased from 12 to 15 years.
  • The guaranteed pension payment period has been increased from 12 to 15 years. That is 72 to 75 years
  • Hazardous employment benefit – underground miners retire at the age of 55 and enjoy full retirement benefits.
  • Must be between 50 and 60 years to receive a pension benefit.
  • It is a defined pension benefit
  • When a person does not qualify for any of the two (2) pension benefits, he or she will receive a return of contributions plus interest
  • Established a Regulator which is the National Pensions Regulatory Authority – NPRA.

Key Features of PNDC Law 247

The highlights of the PNDC Law 247 include:

  • Provision of three (3) benefits – Old Age Pension, Invalidity Pension and Death and Survivors Lump Sum benefit.
  • Pensions are paid monthly to qualified members.
  • It was financed through employer and employee contributions of 12.5% and 5% of basic salaries respectively. The resultant 17.5% is paid solely to SSNIT.
  • Full pension is earned at age 60 with a minimum contribution of 240 months (20years).
  • Reduced Pension is earned between 55 and 59 years with a minimum contribution of 240 months.
  • A 25% Lump sum Payment Option was available for both Full and Reduced Pension. This is paid at the present value discounted at the prevailing Treasury bill rate.
  • Invalidity Pension is earned after 12 months contribution within the last 36 months and member must be declared permanently invalid by a recognized medical officer and certified by a Medical Board.
  • Survivors’ Lump Sum is paid to dependants of a member who dies before retirement or when a member dies while a pensioner before attaining age 72.
  • The minimum accrual rate was 50% and the maximum was 80% of the three best year’s average salary. A return of contributions accumulated at a prescribed interest rate is given to unqualified contributors.
  • Pensions are indexed or reviewed annually.

The Obligation of The Trust

Social Security and National insurance Trust manages the first tier of the 3 tier Pension Scheme. SSNIT has managed Social insurance in Ghana for many years. 

According to the scheme, workers after retirement and injuries are well taken care of under the scheme. All activities carried out by SSNIT are within the scope of the Law.

Currently, the Social Security and National Insurance Trust (SSNIT) is responsible for the management of Ghana’s Basic National Social Security Scheme. 

Its mission is to cater to the first tier of the Three-Tier Pension Scheme. The main responsibility of SSNIT is to make up for part of the lost income of Ghanaian workers.

Therefore the TRUST is authorized by law to;

  • Operate the first tier Basic Social Security Scheme.
  • Ensure comprehensive management of the Social Security Scheme and Regulations.
  • Keep a Fund for contributions and other cash received.
  • Provide Social protection for the working population to deal with unexpected situations including old age, invalidity, death and emigration.
  • Manage and invest funds of the Scheme under the overall guidance of the Board of Trustees and approved by the National Pensions Regulatory Authority (NPRA).
  • Cooperate and collaborate with other complementary social protection schemes to achieve efficiency, save cost and avoid duplication of functions.
  • Manage other Schemes that may be approved by Law.

SSNIT also registers organizations and employees to provide them with unique Establishment Registration (ER) and Social Security numbers respectively.

These numbers are not transferable and shall be used throughout the entire transaction between employers and employees and with SSNIT.

The Trust is to ensure that;

  • The employer regularly pays contributions on behalf of employees.
  • Obstinate employers who refuse to make contributions on behalf of their employees are sanctioned.
  • Reserved funds are invested wisely
  • There is accurate preservation and management of data of its members
  • Benefits to members are paid accurately and promptly.

National Pensions (Amendment) Act, 2014, Act 883

An Act to amend the National Pensions Act 2008 (Act 766) to reduce the age for exemption from the First Tier Scheme, Act 766 and to provide for related matters.

1. Reduction in the Age Exemption

Members who were 55 years and above as of January 2010 were exempted from Act 766. Members aged 50-54 years who were affected by Act 766 were made worse off. Hence the implementation of the National Pensions (Amendment) Act 2014, Act 883. 

Members who were aged 50 as of 2010 have now been exempted from Act 766. This means that all those exempted will continue to contribute 17.5%. 

They will also be paid the full benefit namely, monthly pension and the 25% lump sum by SSNIT. Despite the reduction in the age exemption from 55 to 50 years, it is still optional for any such member to decide to join Act 766.

2. Correction of the formulas for computation of Pensions

The Amendment Act 833 also corrected the formula for the computation of pensions by providing that the minimum 15 years or 180 months period of contribution entitles a member to 37.5% pension right and every additional twelve (12) months contribution entitles the member to 1.125% pension right up to a maximum of 60%.

3. Emigration Benefit

Emigration benefit is a lump sum payment of benefits to non-Ghanaian members of the Social Security Scheme under Act 766 whose services are ended and are leaving Ghana permanently. Whether the member has reached the retiring age or not, whatever benefit is due him/her will be paid as a lump sum in Ghanaian currency to the member.

4. Employers to furnish information by SSNIT within Seven (7) working days

The Amendment provides that, where SSNIT officials request an employer to furnish any information relating to the employer, the employer shall furnish the information within seven (7) working days

What are the contribution rates and how are they distributed between the Employer and Employee?

Employer remits 13.5% out of the 18.5% to SSNIT within 14 days following the end of the month to the obligatory First-Tier Basic Social Security Scheme.

  • Similarly, out of the 13.5% that is paid to SSNIT, 2.5% is sent to the NHIA for the member’s health insurance.
  • The residual amount of 5% is sent to the obligatory Second Tier Occupational Scheme which is managed privately by the Trustees approved and licensed by the Board of NPRA.

Benefits under The SSNIT Scheme

Currently, there are four (4) types of benefits within the SSNIT scheme that members have the chance to enjoy depending on which contingency has occurred.

  1. Superannuation Pension/ Old age Pension
  2. Invalidity Pension
  3. Survivor’s Lump sum.
  4. Emigration benefit

Superannuation Pension/ Old Age Pension

In order for one to qualify for Old Age pension, the said member has to be at least 60 years and should have contributed a minimum of 180 months (15 years) under Act 766 and 240 months (20 years) under PNDCL 247. 

The member who is 55 years but below 60 years receives a reduced pension whilst the 60-year-old receives a full pension.

  • Old Age/Retirement Pension
  • Qualifying Conditions
  • Full Pension

In order to qualify for Full Pension,

  • The member must be at least 60 years and
  • The member must have made a minimum contribution of 180 months (15 years) under act 766 and 240 months (20 years) under PNDCL 247.

The basis for Calculation of Old Age Pension

  • Age
  • Average of Best 36 months / 3 years’ Salary
  • Earned Pension Right – Rating for the number of months member has contributed to the Scheme.

All members can earn a “pension right” between 37.5% and 60% contingent on the number of months contributed at the time of retirement by the member. For example; the minimum contributions of 180 months give a “pension right” of 37.5%. Each additional month which is over 180 months attracts an additional percentage of 0.09375% or 1.125% for One (1) year respectively.

To Calculate Your Pension

Member should just multiply his or her best 36 months (3 years) average salary by his or her “pension right”.

Earned Pension Right Under The National Pension ACT, 2008 ACT 766

The Pension Right for each particular year of contribution for the first 15 years is 2.5% and 1.125% for every additional year up to a maximum of 60.0%.

Pension Right Table

YEARS OF CONTRIBUTIONS

PENSION RIGHT (%)

15 37.50
16 38.63
17 39.75
18 40.88
19 42.00
20 43.13
21 44.25
22 45.38
23 46.50
24 47.63
25 48.75

 

YEARS OF CONTRIBUTIONS PENSION RIGHT (%)
26 49.88
27 51.00
28 52.13
29 53.25
30 54.38
31 55.50
32 56.63
33 57.75
34 58.88
35 60.00
36 & above 60.00

 

Reduced Pension – Early Retirement

In order to qualify for Reduced Pension,

  • The person involved must be 55 years and above but below 60 years of age; and
  • The person involved must have made a minimum contribution of 180 months (15 years) under act 766 and 240 months (20 years) under PNDCL 247.

Early Retirement – Age Reduction

For early retirement reduction with factor from 55 years and below 60 years, the pension is computed as follows:

AGE (YEARS)

% OF FULL PENSION

55 60%
56 67.5%
57 75%
58 82.5%
59 90%

 

Refund of Contributions

In the situation that a member does not qualify for Old Age Pension when he or she retires either compulsorily or voluntarily; the contributions of the member will be refunded to him or her with interest.

Qualifying Conditions

  • Participants must be between 55 and 60 years in order to qualify.
  • Where a member has not made the minimum aggregate contribution period of 180 months, he or she will be entitled to a lump-sum payment of his or her total contributions with interest.

How To Apply

  • In order to apply, just contact the nearest SSNIT Branch with your Smart Card or Biometric Card, letter of retirement from your employer—not obligatory.
  • After that, the SSNIT Branch will then provide you with a Pension Application Form for completion.
  • Continue the process by submitting your completed Form to the SSNIT Branch.
  • Ensure you provide an active bank account number that bears your name — evidence of your bank account details.
  • SSNIT will then advise you to collect your monthly pension at your bank

Note that pensioners after attaining the age of 72 years for those under PNDCL 247 and 75 years for those under Act 766 would be required to go through the identification process yearly.

How Long Will Your Pension Payment Last?

It will last to the time you will die

Invalidity Pension

In order for one to qualify for an invalidity pension, the member must have contributed for 12 months in aggregate within the last 36 months preceding the incidence of the invalidity. He/ She must have also been certified by a Medical Board as being incapable of any normal gainful employment due to a permanent physical or mental disability.

Note that the invalidity pension is paid monthly to such a person who has been confirmed and certified incapable of earning an income.

Invalidity Pension

Qualifying Conditions

To qualify for invalidity pension:

  • The said individual must have made a minimum of 12 months/within the last 36 months with the date of termination of appointment due to your invalidity as the reference point.
  • He or she must have been declared permanently invalid and incapable of any normal gainful employment: By a qualified and certified medical officer and
  • Should be certified by a Regional Medical Board on which an SSNIT Medical Officer is represented.

Medical Examination

  • To partake in the scheme, you are to report to the nearest SSNIT Branch in person or through your representative with a Medical Report from a well-known Medical Practitioner certifying you are invalid.
  • You will then be required to appear before a Medical Board for examination where your invalidity will be certified by the Medical Board.

How To Apply

All members are expected to fulfill their student loan guarantor-ship obligation where applicable before applying for benefits.

  • Get the Pension Application Forms from any SSNIT Branch.
  • Fill and complete the application forms and submit to the SSNIT Branch as early as possible.
  • SSNIT will then notify you to take your monthly pension at a bank of your choice. Make sure your bank account is active and bears your name.

Calculation of Invalidity Pension

After you’ve been certified as being invalid you will be entitled to a pension as follows:

  • You will receive a “pension right” based on your contribution period and the average of the three (3) best years’ salary after you have made the minimum contributions of 180 months or 15 years or more. This will take place irrespective of not attaining the retirement age.
  • You will receive a monthly pension based on 37.5%” pension right “of the average of your best three years’ salary if you made a total contribution of 12 months within the last 36 months even though you might have not satisfied the minimum contributions period,

How Long will Payments be Made?

You will receive your payments till death or when you recover and choose to continue contributing.

Death and Survivors Lump Sum

Death and Survivors Lump sum benefits are normally paid to nominated or eligible beneficiaries of a deceased contributor or pensioner. Also, it can be paid to persons upon an order by a court of competent jurisdiction.  

The benefit is usually paid when a member dies in active service or during retirement and has not attained the age of 72 years for those under PNDCL 247 and 75 years for those under the National Pensions Law, Act 766 respectively. 

Deceased member’s beneficiaries will be identified and all benefits due paid to the beneficiaries identified.

Survivor’s Lump Sum

This is a form of benefit paid to dependants of members under the following conditions:

  • When the member dies before retirement; or
  • When a pensioner dies before attaining age 75.

Calculation of Survivors’ Lump Sum

The benefit is computed as follows:

  • Where a member dies having made at least twelve months contributions within the last 36 months prior to the death of the member, a lump sum payment of the earned pension of the deceased member for a period of 15 years will be paid. The amount will be the present value discounted and paid to the member’s nominated dependants.
  • Where a member dies before making at least twelve months contribution within the last 36 months, a lump sum equal to the total contributions and interest shall be paid to the nominated dependants.
  • Where a pensioner dies before attaining age 75, a lump sum payment based on the present value of the unexpired pension of the member will be made to the beneficiaries.

How To Apply

  1. Report the death of the member to the nearest SSNIT Branch with any of the following:

Primary Evidence:

  • Letter from the employer where available.
  • Affidavit from Chief of the Village or Town.
  • Police Report.

The following Secondary Evidence of death could be accepted in addition to the above mentioned:

  • Posters
  • Burial Permit, etc.
  1. On receiving information of the death of a member, SSNIT will identify the nominated dependant(s) and request them to apply for the benefit.
  2. A dependant(s) may call at an SSNIT

Branch to collect, complete and submit an Application Form with the following:

  • The Membership Certificate of the deceased if available.
  • Birth Certificate of minors if applicable
  • A Bank Account Number that bears the dependant’s name – evidence of bank account details.
  • A photo identity card.

SSNIT will process the application and a lump sum payment will be made into the account.

Emigration Benefit

Emigration benefit is a lump sum payment of the benefit to non-Ghanaian members of the Social Security Scheme under Act 766 whose services are ended and are leaving Ghana permanently. 

Whether the member has reached the retiring age or not, whatever benefit is due him/her will be paid as a lump sum in Ghanaian currency to the member.

To qualify for emigration benefits:

  • You must be a non-Ghanaian contributor.
  • You should be leaving Ghana Permanently.

How To Apply

Contact the nearest SSNIT office with the following:

  1. A confirmation of your nationality.
  2. Copy of your work and residence permit.
  3. A copy of your passport. (Personal Details Section)
  4. Evidence of Bank Account (in Ghana) that bears your name.
  5. The completed forms should be submitted to the Branch office.
  6. A letter from your employers. (Evidence that you are emigrating)
  7. SSNIT will advise you to collect your lump sum payment at the bank.
  8. Evidence that the beneficiary will be out of the country at the time of Payment.
  9. The Branch will provide you with an Emigration Lump Sum Benefit application form to be completed and endorsed by the Mission.
  10. In case a beneficiary wants someone to receive the benefit on His/her behalf, the following must be done:
  11. Authority to Receive Benefit on Behalf of a Beneficiary Form must be properly completed and signed by the beneficiary.

Calculation of Emigration Benefit

  1. If the member does not qualify for Pension a return of contribution together with interest will be paid to him or her.
  2. If the member qualifies for Pension; the present value of the member’s pension shall be paid as lump sum benefit.

Frequently Asked Questions (FAQs)

Q – What is the three-tier SSNIT Pension scheme?

A – The three-tier contributory scheme, a hybrid of the defined benefit and defined contribution schemes, is made up of the following:  

Tier 1: A mandatory contributory scheme with monthly contributions of 13.5% (11% towards monthly pensions and 2.5% contribution to NHIS) on the basic salary of all employees. Tier 1 is a defined benefit scheme and contributions are fully tax-exempt and are managed by SSNIT. This scheme will pay monthly benefits to employees upon retirement.  

Tier 2: A mandatory contributory scheme with monthly contributions of 5% on the basic salary of all employees. Tier 2 is a defined contribution scheme and contributions are fully tax-exempt and are privately managed by National Pensions Regulatory Authority (NPRA) licensed service providers. 

The scheme will pay out a lump-sum benefit to individuals upon retirement, which is comprised of all contributions made under the scheme plus all returns earned on their contributions. There are two types of Tier 2 schemes: Employer-Sponsored Schemes (ESS) and Master Trust Schemes (MTS). 

If the membership of the scheme is limited to the employees of a specific company, it is deemed to be an Employer-Sponsored (ESS). On the other hand, if members of the scheme is opened to employees of different companies, the scheme is referred to as a Master Trust Scheme (MTS).  

Tier 3: An optional contributory scheme with monthly contributions of up to 16.5% of the employee’s basic salary on the basic salary of all employees and informal sector workers. Tier 3 is also a defined contribution scheme and is privately managed by NPRA licensed service providers. 

The contributions for Tier 3 are also tax-exempt. If an individual has been in the scheme for 10 years or more, he or she will receive all contributions made under the scheme in addition to all returns earned on their contributions at the time of exit. 

In the event of an exit prior to the contributor’s tenth anniversary, a marginal tax rate of 15% will be applied to the contributor’s total redemption amount. 

Q – Can a member withdraw part of his contribution?

A – That is not possible. A member cannot withdraw part of his contribution because the scheme is not a saving scheme. All contributions have to be made over a period of time and invested by SSNIT to enable the scheme to pay out the benefits guaranteed under the scheme. 

So if part of the accrued contributions is allowed to be withdrawn, the assets of the scheme will be reduced which will make it impossible for SSNIT to provide the benefits promised.

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