Almost eight years after the passage and subsequent implementation of the new three-tier pension scheme, set-up under a Pensions Regulatory Authority, with a special provision to include workers in the informal sector, it has emerged that the response of those in the informal sector towards the new scheme has been wobbly.
Informal sector workers, forming the majority, 85 percent, of the total workforce of the country, under the previous pension regime, were ‘denied a slot’ until the introduction of the Informal Sector Social Security Scheme, in 2005.
But as part of reforms in the pensions sector, in 2008, leading to the passage of a New Pensions Law, National Pensions Act, 2008 – Act 766, both formal and informal employees have an opportunity to contribute towards a ‘social insurance.’
The new three-tier pension’s scheme comprises two mandatory schemes and a voluntary scheme.
The first-tier, which is a mandatory basic national social security scheme, incorporates an improved system of SSNIT benefits, for all employees both in the private and public sectors.
The second-tier, an occupational, or work based, pension scheme, mandatory for all employees but privately managed and designed primarily to give contributors high lump sum benefits than previously available under the SSNIT pension scheme.
The third-tier, the voluntary Provident Fund and Group / Personal Pension Schemes, supported by tax benefit incentives to provide additional funds for workers in the formal sector who want to make voluntary contributions to enhance their pension benefits and also for informal sector workers.
The inclusion of those in the informal sector is envisaged to enable them to save towards old age. Again, it is expected that this will bring transformation in their living standards and secure financial autonomy and independence in old age.
However, despite all these, it has become evident that not a fair proportion of the informal sector workers population has been captured under this new scheme since its implementation in 2010.
The Ashanti and Brong Ahafo Zonal Manager of the National Pensions Regulatory Authority (NPRA), Mrs. Rosina Akrofi, said several people in the informal sector have signed onto the scheme although majority of the people are yet to.
She however added that the NPRA is ongoing with its nationwide outreach programme, targeted at those in the informal sector, to educate them on the need to take advantage of the scheme to secure their future.
She observed that the opportunity has now been availed for informal sector workers to also contribute towards a ‘well-desiring’ retirement period and urged that they make the best out of this opportunity as against putting their monies with phony financial institutions only to regret later.
Mrs. Akrofi, who said this in an interview, at the backdrop of a regional outreach programme on education and sensitization on the three-tier pension scheme for informal sector workers, in Kumasi, noted that pension contribution is a necessary long-term financing package.
“The informal sector workers will elect to contribute any amount they can afford on monthly or regular basis. It must be emphasized that the benefits that will accrue will depend on how much contributions are made and the returns on investments. The more the amount contributed, the bigger the benefits.”
“Persons in the informal sector who are not covered by the mandatory schemes shall have 35 percent of their declared income, exempt from tax for contribution purposes; whiles investment income from investment of Scheme Funds shall be tax-exempt.”
The mandatory first-tier basic national social security scheme is managed by SSNIT while the mandatory second-tier and voluntary third-tier schemes are privately managed by Trustees licensed by the NPRA and supported by registered Pension Fund Managers and Pension Fund Custodians.
The national chairman of the Union of Informal Sector Workers Association (UNIWA), an affiliate of the Trade Union Congress (TUC), Mr. Boakye Dankwa Boadi, urged that informal sector workers take advantage of this new scheme.
He noted that those in the informal sector were neglected in the past, despite their huge numbers, but encouraged that they join groups to sign on to the pension scheme while also taking steps to be part of UNIWA.
He said UNIWA has been formed to fight to champion the interest of informal sector workers in the country.