Editorial: NPRA intensifies enforcement of Tier Two pension scheme

Ghana’s pensions regulator, the National Pensions Regulatory Authority (NPRA), says it has recovered GH¢27million from employers that defaulted on workers’ pension contributions.

Addressing media, Deputy CEO-NPRA Victor Azuma Mejida said this represents only 30 percent of total amounts in arrears. NPRA has pledged to recover more, noting that 40 newly-trained prosecutors will soon be deployed to intensify enforcement across the country.

Mr. Mejida used the opportunity warn that employers who deduct tier-two contributions from workers’ salaries but fail to remit them spells doom for the worker.

“Reports from trustees indicate that some employers have refused to pay contributions despite having deducted this amount from employees’ earnings. Some have not even beregistered a scheme for their staff.”

Under Section 83 of the National Pensions Act (Act 766), employers who default in paying workers’ contributions face a 3 percent monthly compounding penalty and possible prosecution.

Mr. Mejida noted that employers can either comply or be “named and shamed” through the media. The authority is beefing-up efforts to clamp down on recalcitrant employers.

“We are intensifying employer inspection as enshrined in Section 27 of Act 766,” he said. Interestingly, government itself is among the defaulting employers but this is currently being worked on.

NPRA is reviewing pension investment guidelines to encourage more funding into the real sector, including infrastructure and SME financing – citing an example where only GH¢45million pension-backed funding supported 45 SMEs, creating nearly 300,000 jobs.

The authority announced it will soon launch a “pensions digital ecosystem” to ease enrolment onto a dedicated Tier 3 informal sector pension scheme, which is yet to be rolled out.

Per the National Pensions Act, employers are required to remit 5% of the 18.5% mandatory pension contribution to a private Corporate Trustee on behalf of employees. Contributions are based on monthly pay and are deducted from gross pay before tax.

The scheme is a defined contribution pension scheme; that is, a pension scheme in which the retirement benefit paid to members depends on the amount of total contributions and the investment returns earned on those contributions.

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