Disturbing reasons why your SSNIT pension will be “small” and what to do

I am sure many Ghanaians are not aware of the disturbing reasons why their SSNIT pension after retirement will be “small”  and many of us do not also know what we can do now about this bleak future.

Data available on SSNIT contributors shows that out of the 1.7 million active SSNIT contributors, those who earn a basic salary between 2000 and 5000 add up to 5%, 15% earn a basic salary above Ghs5000.00 a month while a whopping 80% earn a basic salary of GHS2000 or less.

Where does your basic salary fall? 80%, 15% or 5% group? If you are part of the te 15% or 80% brace yourself for proactive decisions and choices because your pension will be that low if care is not taken.

Your pension from SSNIT when you retire can be seen as your take-home insurance benefit. Do you agree with me on that?

Today, the highest SSNIT is paying a retired worker as pension is about GHS130,000 and the lowest is GHS300.

With the amount your employer contributes to SSNIT on your behalf, where will your pension from tie 1 be between GHS300 and GHS130,00 when you retire? 

If you belong to the 80%, the long-term effect is a low pension upon retirement no matter your years of contribution. Yes that is true and you should be worried but there is a way out of this.

Disturbing reasons why your SSNIT pension will be “small”

One or more of the following acts will contribute to a low retirement benefit from SSNIT when you retire.

1. Under declaration of basic pay by the employer.
2. Under declaration of basic pay by the employee.
3. A higher chunk of monthly pay is declared as allowance.
4. Employees fighting for an increase in allowance instead of basic pay while in active service or employed.
   5. Entering into agreements with the employer not to pay SSNIT on your behalf.
   6. Employers deducting SSNIT but failing to pay and employees doing nothing about it.
   7. If your employer is not contributing to your tier two, watch out, for it will affect your total lump sum benefit paid. This is supposed to be paid to a fund-managing company on your behalf.

Any positive action you take to deal with one or more of the above will position you for a higher retirement benefit from SSNIT.

SSNIT pension facts to know as an employee

• Truth be told, your SSNIT benefit or pension or insurance benefit upon retirement is 60% salary according to the Pensions Act, Act 766. “You can earn a “pension right” between 37.5% and 60% depending on the number of months contributed at the time of retirement. This means you cannot go on pension and still earn the same income you were receiving on a monthly basis.”
• Apart from Article 71 officeholders, no Ghana retires on their salary. When you retire, all your remuneration and allowances drop to zero and you will now need funds from your pension benefits to weather the storms of life in old age.
• Another piece of information regarding your SSNIT pensions is that SSNIT pays only monthly pensions upon the retirement of the contributor out of tier 1 contributions while the lump sum is paid from tier 2 by fund managers.
• SSNIT does not deduct contributions from employees instead employers or employees declare salaries for SSNIT deductions and payments on their behalf by employers.
• If you have a high employee gross pay but low basic pay, you will have a low monthly SSNIT contribution, which will end up as a low retirement benefit.
• Your current pay will not necessarily lead to better retirement benefits if a greater percentage are allowances unless it translates into higher contributions.

The reality about a “small” SSNIT pension and the allowance battles in workplaces

You may work for 15, 20, 30, or more years and still receive a very small SSNIT pension upon retirement.

Another contributor may contribute to SSNIT for a few years say 15 years and receive higher SSNIT retirement benefits because he or she contributed more within the short period.

You would agree with me that, if your maximum monthly contribution to SSNIT was 100ghs a month for 30 years and that of another person was 300ghs for 20 years there is a high chance your retirement benefits will be lower compared to the other person.

It is sad that many employees in Ghana get excited about the allowances they receive and not the basic salary on which SSNIT is calculated.

All the pre-tertiary teacher unions, TEWU, UTAG, and the other trade unions always hit the government with strike actions and threaten to take industrial action over allowances. These do not help workers since these allowances do not translate into basic pay for SSNIT deductions and payments. Thus putting the lives of their members in danger by not asking the government to increase their basic pay which will reflect an increase in their SSNIT contribution towards future retirement benefits.

If you enjoy the allowances today, it will show in your total SSNIT benefits in the future unless you pay some of these allowances as tier 3 contributions to SSNIT.

Read: Know your future monthly pension (SSNIT) in today’s value (Present Value)

If workers continue to fight for increases in their allowances instead of their basic salaries then the implications and effects will be very small, annoying, and disheartening retirement benefits in the future when they retire. This will not be the doing of SSNIT but your own contribution.

Read: Ghana’s formal sector workers salaries decreased by 12% in 2022

In case you earn extra income from other sources of work, request for the employer to pay SSNIT on your behalf or better still opt for tier 3.

Read: How your SSNIT Retirement (Pension) Benefit is Calculated

What is the next step to take regarding your pension and that of others?

Take a bold step to ensure you do not put your pension and retirement benefits as a SSNIT contributor in danger. Take charge of your SSNIT pension value today. Now you know, share the content with others and let us all educate ourselves.

Source: Wisdom Hammond |Ghana Education News