Nearly every worker in active service today will one day go on retirement and relieve his or her pension benefits from SSNIT and other insurance companies he or she contributed to, however not all workers know their future monthly pension in today’s value (Present Value).
Answer these questions quickly before we proceed.
Do you know your future monthly pension in today’s value (Present Value)?
Do you know your pension benefit is one of your insurance benefits when you retire from active work?
Do you know you will not get your entire contribution to SSNIT as your pension benefits when you retire?
Teaser: Do you know that workers can only get a maximum of 60% of their monthly basic salary as a monthly pension?
Facts you need to know about SSNIT contributions, retirement benefit,s and others
- The current pension laws stipulate that for every one year a member contributes give that member 2.5% for the first 15years.
- This means after the first 15years of contributions, an individual is entitled to 2.5% x 15years = 37.5%
- Every extra year contribution would attract 1.125%.
- So any member who contributes for 32years means the person would be entitled to 37.5% (for the first 15years) plus 19.125% (for the last 17years i.e 1.25% x 17yrs = 19.125%)
- Therefore, for the individual who contributed 32years would qualify for a percentage of 37.5% + 19.125% = 56.625%
- Currently, the MAXIMUM percentage any worker qualified for is 60% (for 35years contributions) and the MINIMUM percentage is 37.5% (for 15years contributions)
- Anyone who works less than 15yrs would not get a monthly Pension but would get a refund plus interest at the current T-Bill rate.
- Also, note that the number of years worked is different from the number of years contributed. An example is those who went for study leave without pay or people who suffered deletion. For those who did not get their legacy arrears, it means their pension too was not paid.
- So use the number of years contributed and not just working years even though both can be the same if there are no salary issues during working years.
- Now to know your monthly pension, use your percentage to multiply your LAST year’s MONTHLY basic salary. I mean BASIC SALARY (It does not include retention)
- Since salary increase by government is always around inflation rate or even less than inflation, it must be known that, even though our salaries would increase yearly in amount/quantity upto pension, the fact is that the VALUE (what it can buy) would be the SAME AS what it could buy now. So let’s not think our salaries are being increased, it’s actually to offset inflation and help us buy what we were buying last year.
- We are multiplying the percentage accrued from the number of years contributions by last year’s monthly salary for two reasons even though the law said we should multiple by the best three years’ AVERAGE.
a. All things being equal our best three years would be our last three years’ salaries to retirement. This clause is in the law because someone who worked elsewhere before (e.g NGO) could have his previous salary over ten years ago still being higher than his/her salary at retirement in a public sector
b. All things being equal, when you find the average of three numbers, the answer is likely or would be close to the middle number. For example, the average of 1,2&3 is 2.
It’s because of the above two reasons the percentage can be multiplied with the immediate past year’s salary since the last year’s salary would be more than last two years salary but less than the current years’ salary. In short, it’s in the middle.
Now that you know your pension benefit is one of your insurance benefits when you retire from active work, it is time to take it seriously and ensure, your employer pays every penny deducted from your earnings while in active service.
By: Vincent Agbenyo (A Volunteer)