'Don't terminate existing provident funds'

THE National Pensions Regulatory Authority (NPRA) has advised pension contributors not to terminate their existing provident funds but rather migrate them to the third tier of the new pension scheme.
The authority explained that contributors who continue to the new scheme would on retirement receive the benefit of replacement of ratios, tax incentives and other benefits of the new pension scheme.
Addressing participants in a public forum in Accra, the Chairman of the NPRA, Mr Kwame Asante, stated that at a previous forum, it came out that members of existing provident fund schemes were terminating their old scheme and starting new ones contrary to the expectation of service providers and that of the authority.
“I will therefore appeal to the current trustees, management and advisors of provident fund schemes to leave them intact and not pull them out and start new ones,” he stressed.
The theme for the forum was: “The implications and benefits of the new Pension Scheme with special focus on Provident Fund Schemes”.
The implementation of the new pension scheme under Act 766 of 2008, started on January 1, 2010 with mandatory first and second tiers. Under this new scheme, members are expected to receive higher lump sum benefits and also have a better control over their pension benefits under the privately managed second and third tier schemes.
In his remarks, Mr Asante reiterated the fact that there was a positive incentive for scheme members to make additional voluntary contributions into the third-tier scheme so as to accrue more benefits for their retirement.
He pointed out that in terms of general economic benefits, pension schemes could become a significant source of investment capital for national development.
In his presentation, the acting Chief Executive Officer (CEO) of the NPRA, Mr Daniel Aidoo-Mensah, added that benefits of the new pension scheme included improved qualifying conditions and survivors benefits under the first tier social security scheme.
He explained that one needed 15 years contribution to qualify for the Social Security and National Insurance Trust (SSNIT) benefits instead of 20 years and also survivors’ benefit period increased from 12 years to 15 years.
Mr Aidoo-Mensah said members’ involvement in the running of their scheme this time, would help promote a sense of ownership and also create confidence that the scheme was being run properly.
On tax benefit, the CEO said contributions up to specific limit, as well as investment income and retirement benefits, was tax exempt.
He said sections 129 and 135 of the Pensions Act provided three types of scheme which were employer sponsored — master trust and informal sectors schemes — and went further to advise that employers and employees might consider participating in a master trust scheme.
Mr Aidoo-Mensah said master trust scheme could be done by pooling together contributions of different employers and their employees for high degree of efficiency in terms of scheme administration and investment, resulting in economies of scale.
He advised service providers and individuals who wanted additional information on the scheme to go to info@pensioncommission.org.
For his part, a Chief Inspector at the Internal Revenue Service (IRS) Training Division, Mr Francis A. E. Akoto, said Act 766 was an improvement on the old pension scheme which operated under Act 592.
Speaking on: “Tax Relief under the National Pension Act, 2008 (Act 766), he said contributors stood the chance of benefiting from various tax exemptions as compared to the old scheme.