Fund managers bitter over Tier-2 snub

Pension fund managers have threatened to lay-off workers and close shop altogether over government’s refusal to pay workers contributions to the Tier-2 of the three-tier pension scheme.

Mr. Korsi Dzokoto, Chief Executive of Waxson Investment & Pensions Management Limited, told the B&FT that: “The decision of government to service its GH¢1billion tier-two debt through cash and bond issuance is detrimental to survival of the over-40 registered fund managers.

“We have employed people and have been paying their salaries over the past three years. We have been paying huge rent, utility bills and others in anticipation of the release of workers contribution to the tier-two scheme so we can manage it. We are fund managers with no funds to manage. If the situation continues we might have to let the workers go.”

Mr. Dzokoto is one of the many pension fund managers who have complained about the adverse effect of government’s continuous delay in paying workers contributions to the Tier-2 pension scheme.

Government has defaulted in the payment of workers contribution to the Tier-2 pension scheme to the tune of GH¢1billion. This adds to the GH¢288million owed the Social Security and National Insurance Trust (SSNIT) as the Tier-1 operator while government continues to borrow from salaried workers by running arrears. Employment and Labour Relations Minister Haruna Iddrisu told Parliament that the debts will be cleared by cash and bond issuance at an unspecified future.

“It is true that the state owes SSNIT and the second tier contribution. Government owes SSNIT GH¢288million as at April 2015, but it has honoured its obligations from 2010 up to April this year.

“In respect of the second tier, there is an outstanding of not less than GH¢1billion and the Ministry of Finance through cash and bond issuance is working to honour the obligations,” he said.

The pension contribution arrears have become a source of frustration for workers in the public sector, especially those nearing retirement.

It is however not clear what the monies borrowed by the government from the pension fund was used for, but the minister said such arrears are sometimes unavoidable.

"Sometimes fiscal constraints compel the Minister of Finance to defer payment of pensions in order to meet other compelling national obligations," he stated.

Mr. Iddrisu maintained that the total stock of contributions from both the public and private sector amounted to GH¢2.9billion and some arrears owed by the state.

The current three-tier pension system, enacted into law in 2008 and operationalised in January 2010, demands employers to register their staff under a first-tier basic pension scheme managed by SSNIT and a second-tier work-based scheme that is privately managed. The third tier is voluntary and includes provident funds and personal pension schemes.

The reforms, which ended the monopoly of SNNIT, have been hailed as a major step toward improving the retirement conditions of workers through competition that will maximise the returns earned on pension investments.

It is projected that the reforms will grow the pension industry’s assets from GH¢1.06billion to GH¢5.5billion over the next four years.

However, the failure of government to release contributions from the Tier-2 funds managed privately by trustees licenced by the National Pensions Regulatory Authority (NPRA) and assisted by Pension Fund Managers and Custodians has enraged workers -- who have dragged government to court over its management.

Currently, all schemes registered for the public institutions that are on the Controller and Accountant-General’s payroll are yet to be operational. This is as a result of the dispute between government and organised labour over who has the right to establish a second-tier scheme for public sector workers.

Mr. Iddrisu told Parliament that adequate safeguards have been built into the Scheme to ensure workers interests are protected.

“One such safeguard is the requirement for Trustees of pension schemes to take out adequate insurance to indemnify scheme-members against any loss of scheme assets caused by malfeasance or misconduct of the Trustees of their service providers.”

It is understood that under the status of second-tier scheme, a total of 10,000 employers have registered or signed on.

As a transitional arrangement to carry through its mandate, the NPRA established a Temporary Pension Fund Account (TPFA) to receive tier-2 contributions from private sector employers on behalf of their employees, and also from a public sector employer on behalf of its employees.

The Controller and Accountant-Generals’ Department transfers contributions on behalf of the public sector, while SSNIT pays contributions from private establishments into the account at the Bank of Ghana.