How Much is a Worker Required to Contribute to the Scheme?
Contributions to the Three-tier Pension Scheme are as follows:
- An employer of an establishment shall deduct from the salary of every worker in the establishment immediately at the end of the month, a worker’s contribution of an amount equal to five and half per centum (5.5%) of the worker’s salary for the period, irrespective of whether or not the salary is actually paid to the worker;
- An employer of an establishment shall pay for each month in respect of each worker, an employer’s contribution of an amount equal to thirteen per centum (13.0%) of the worker’s salary during the month;
- Out of the total contribution of eighteen and a half per centum (18.5%) an employer shall within fourteen days from the end of each month transfer the following remittances to the mandatory schemes of each worker:
- Thirteen and half per centum (13.5%) to the First Tier mandatory basic national social security scheme; and
- Five per centum (5%) to the second tier mandatory Occupational Pension scheme
- Out of the total contributions of thirteen and half per centum transferred to the First Tier mandatory basic national social security scheme, two and half per centum (2.5%) shall be deducted and transferred to the National Health Insurance Fund;
- The minimum contribution is eighteen and half per centum of the approved monthly equivalent of the national daily minimum wage;
- Total contributions by employer and employee to the Third Tier scheme are tax deductible up to sixteen and a half per centum (16.5%) of employee’s gross month salary.
It is an individual or corporate entity that holds property/assets on behalf of another person normally known as the beneficiary.
What Happens to the Accrued Benefits of a Worker who Ceases to be an Employee?
A member of a scheme who ceases to be an employee shall elect to have the member’s accrued benefits transferred to another scheme in accordance with the regulations of the scheme.
What is an Occupational Pension Scheme?
What is the Qualifying Age for a Person to Join the National Basic Social Security Scheme?
A Trust is an arrangement involving normally three parties of which one party entrusts the property/assets to another party to be transferred to the third party (beneficiary) at a point in time or a specified period.
What is a Master Trust Scheme?
It is a multiple-employer scheme that allows different employers and their workers to join and is normally administered by a corporate trustee in line with the scheme rules approved by NPRA.
GLICO Pensions has two Master Trust Schemes with a large number of employers contributing to the schemes. Please refer to our products.
Can an Individual Employee Select His Or Her Trustee to Manage the Second Tier Mandatory Occupational Pension Scheme?
No, it is the responsibility of the employer to select the trustee to manage the Second Tier mandatory Occupational Pension Scheme on behalf of its workers.
When Can a Worker/Contributor Withdraw His/Her Accrued Benefits under the Third Tier?
A worker/contributor may withdraw his/her accrued benefits under the Third Tier under the following conditions:
- A member who has attained the retirement age is entitled to the entire accrued benefits in the scheme in the form of a lump sum.
- A member who has not attained retirement age may withdraw all or part of the member’s accrued benefits from a scheme:
- after ten years from the date of first contribution in the case of the Provident Fund or Personal Pension Scheme for contributors in the formal sector;
- after five years from the date of first contribution in the case of Personal Pension Scheme for contributors in the informal sector;
- following certification by a medical board that the contributor is incapable of any normal gainful employment by virtue of physical or mental disability.
- The beneficiaries of the estate of a deceased contributor may withdraw the accrued benefits of the deceased from the scheme.
Can an Employer Choose Its Own Pension Fund Manager and or Custodian?
Yes, an employer is permitted to choose its own pension Fund Manager and or Custodian ONLY if the scheme is an Employer-sponsored Scheme. However, if the scheme is a Master Trust Scheme, then the corporate trustee has the responsibility of choosing the pension fund managers and custodian.
Does a Worker Enjoy any Tax Reliefs for Contributing Under the National Pensions Act?
Yes, a contributor under the National Pensions Act enjoys the following tax benefits:
- a) An employer or employee shall not pay income tax in respect of contributions to the basic national social security scheme and mandatory occupational pension schemes
- b) Contributions not exceeding sixteen and one half per centum of a contributor’s monthly income, made by either a contributor or the contributor’s employer or both to a provident fund or personal pension scheme shall, be treated as tax deductible income, for the purpose of income tax for the contributor and the contributor’s employer to the extent of their respective contributions
- c) Tax is not payable on the benefits received under Act 766
- d) Investment income including capital gains from the investment of scheme funds shall for the purposes of income tax be treated as deductible income
- e) A withdrawal of all or part of a contributor’s accrued benefits under a provident fund or personal pension scheme on or after retirement shall be tax exempt
it shall, however, be subject to the appropriate income tax for contributors in the formal sector, who withdraw their benefits before ten years of contribution and before retirement.