Social Security and Pension

How do Pensions and Social Security work in Ghana?

The National Pensions Act, 2008 in Ghana establishes a contributory three-tier pension scheme consisting of the following:

• A mandatory basic national social security scheme
• A mandatory fully funded and privately managed occupational pension scheme
• A voluntary fully funded and privately managed provident fund and personal pension scheme

The basic national social scheme operate under the Social Security and National Insurance Trust. The occupational pension scheme, provident fund scheme, personal pension scheme and other privately managed pension schemes are managed by trustees approved by the board.

The objective of the scheme is:

• To provide pension benefits to ensure retirement income security for workers
• To ensure that every worker receives retirement and related benefits as and when due
• To establish a uniform set of rules, regulations and standards for the administration and payment of retirement and related benefits for workers in the public and the private sector.

Who does the social security scheme apply to?

• Every employer and to each worker employed by its establishment
• Self-employed persons who opt to join the social security scheme

What is the contribution of an employer to the social security scheme?

An employer of an establishment shall pay for each month in respect of each worker, an employer’s contribution of an amount equal to thirteen per cent (13%) of the worker’s monthly salary.

An employer of an establishment shall deduct from the salary of every worker in the establishment immediately at the end of the month, a worker’s contribution of an amount equal to five and half per cent of the worker’s salary for the period, irrespective of whether or not the salary is actually paid to the worker

When is the employer expected to transfer the deduction to the mandatory scheme?

Out of the total contribution of eighteen and half per cent an employer shall within fourteen days from the end of each month transfer the deduction to the mandatory scheme.

What should be the percentage of the contribution to be remitted by an employer to the mandatory schemes on behalf of each worker?

An employer shall remit the following to the mandatory scheme on behalf of the worker:

• Thirteen and half per cent to the first mandatory basic national social security
• Five per cent to the second tier mandatory occupational pension scheme

Where an employer deducts a contribution from the salary of a worker, the contribution shall be held by the employer in trust until it is remitted to the relevant schemes.

Is it compulsory for an employer to make a contribution to the third tier in addition to the first and second tiers?

No. An employer may in addition to the total contributions being made by the employee and the employer, make voluntary contributions to a scheme under the third tier.

What is the penalty for non-payment of contributions by an employer?

If the employer fails to pay a contribution within the specified period:

• A sum equal to three per cent (3%) per month of the contribution payable shall be added to the contribution as a penalty
• The Director-General shall serve a demand notice to the defaulting employer and if payment of the contribution and penalty is not made within thirty days after the date of the service of the notice, the Director-General may proceed to collect and recover the contribution and penalty; and if an employer without reasonable excuse fails to pay the contribution and the penalty, he/she may be ordered to pay an additional penalty of a sum equal to three per cent of the total of the outstanding contribution and penalty imposed.

What is hazardous employment benefit?

A member of the social security scheme who has attained the age of fifty-five years and has been a worker at an underground mine or at a steel works or in any other employment determined as hazardous employment for an aggregate period of not less than one hundred and eighty months, is entitled (on retirement) to full retirement benefit.

What conditions qualify a worker for pension entitlement?

A worker is qualified for a pension when he or she satisfies the following conditions:

• A minimum contribution period of not less than one hundred and eighty months
• Has attained the age of sixty years, or fifty-five years in the case of an underground mine worker or a worker who has opted for voluntary retirement with reduced pension and filed an application for superannuation,

How is pension entitlement computed?

The minimum pension payment is based on fifty per cent (50%) of the average annual salary for the three best years of a member’s working life. Where a worker works beyond the minimum contribution period, the amount of pension payable is increased by one and half per cent for every additional twelve months worked up to a maximum of eighty per cent.

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