United Pension Trustees

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Frequently Asked Questions

What is the three tier pension scheme?

In 2008 an act was passed by parliament in response to the public agitation to ensure the creation of a sustainable unified pension structure for all workers in the country. The act established a contributory scheme consisting of the following tiers

Tier 1: A mandatory basic national social security scheme

Tier 2: A mandatory fully funded and privately managed occupational scheme

Tier 3: A voluntary fully funded and privately managed provident fund and personal pension scheme

What are the major features of the three tier pension scheme?

 

Who manages it?

What type of benefit payment do I get?

What are the contribution rates?

Is it Mandatory or Voluntary?

Tier 1SSNITMonthly pension payment11% +(2.5% NHIL) of gross salaryMandatory
Tier 2Corporate trusteesLump sum payment5% of gross salaryMandatory
Tier 3Corporate trusteesLump sum paymentUp to 16.5% of gross salaryVoluntary

Who is a trustee?

A trustee means an individual or a company appointed to carry out the purposes of a trust in accordance with the provisions of the trust instrument and general principles of trust law.

Occupational pension schemes, provident fund schemes, personal pension schemes and other privately managed pension schemes shall only be managed by trustees licensed and approved by NPRA.

What is the role of a trustee and how should I select a corporate trustee?

Appointment of service providers: The trustee shall appoint fund managers, custodians, and other service providers; trustees would have oversight responsibility to ensure their compliance with regulatory requirements or guidelines.

Investment services: The trustee is responsible for establishing and maintaining the investment policy and strategic asset allocation for the scheme. Trustees are required to have the required investment knowledge expertise to carry out this critical task.

Scheme Administration: The trustee is responsible for keeping proper records of contributions received, processing transfers in and out of the scheme, sending statements to clients, and paying our benefits. Trustees are required to have systems in place that ensure the smooth running of all operational processes involved in the administration of the scheme.

The key criterion in choosing a corporate trustee is ensuring the trustee is licensed by NPRA and is capable of effectively carrying out its duties as trustees in order to provide your employees with a sound retirement package.

How do I enroll my employees under the tier 2 and 3 schemes?

Companies can set up standalone schemes or join master trust schemes that have been set up by corporate trustees. It is recommended that smaller companies join master trusts which consist of multiple employers and are more cost-effective. Companies that join or set up tier 3 schemes have the opportunity to customize the scheme to suit its needs.

What happens if I leave my current employer?

Tier 2 benefits: When an employee changes employment, the law provides for the employee to elect to transfer his/her accrued benefits to another scheme in accordance with the regulations of that scheme. The approved trustees of the respective schemes shall comply with requirements with respect to the transfer of the benefits.

Tier 3 benefits: Subject to the vesting rules of the scheme the employee may forfeit part or the total amount of the employer’s contribution if the worker leaves the employment of the employer before the end of the vesting period. An employee who satisfies the vesting requirements may elect to receive his accrued benefits subject to a tax clawback of 15% before ten years or transfer it to a personal pension scheme.

When can an employee access his or her funds?

Tier 2
• A member of the scheme who has attained retirement age is entitled to the entire accrued benefits in the scheme in a lump sum
• A member who has not attained retirement age but has attained the age of fifty years and is not employed or self-employed is entitled to the entire accrued benefits
• A person who is not a citizen of Ghana who does not satisfy the qualifying conditions for benefit but desires to emigrate permanently from this country may be entitled to the entire accrued benefits in the scheme in a lump sum
• A member of the scheme who is retired on the decision of a properly constituted medical based on the advice of a suitably qualified physician certifying that the employee is no longer mentally or physically capable of performing the functions of the office is entitled to the entire accrued benefits in the scheme in a lump sum.
• A member who is retired due to total or permanent disability either of mind or body is entitled to the entire accrued benefits in the scheme in a lump sum.
• A member who retires before the age of fifty years in accordance with the terms and conditions of employment is entitled to the entire accrued benefits in the scheme in a lump sum
• On the death of a member of the scheme, the approved Trustee shall pay the whole of the member's accrued benefits as a lump sum
(a) To the members nominated beneficiaries, or
(b) If there are no nominated beneficiaries, to a person specified in the rules of the scheme

Tier 3

• A member who has attained the retirement age is entitled to the entire accrued benefits in the scheme in a lump sum.
• A member who has not attained the retirement age may withdraw all or part of the member's accrued benefits from the scheme
(a) After ten years from the date of the first contribution in the case of the provident fund or personal scheme for contributions in the formal sector.
(b) After five years from the date of first contribution in the case of the personal pension scheme for contributions in the informal sector

The contributor can still access their provident fund contributions that vest in them before the stipulated number of years but subject to a tax clawback of 15%

What is expected of an employer under the act?

The main role of the employer is to act as a fiduciary to its employees. Employers are responsible for the setting up, monitoring of performance of the tier 2 schemes and remitting contributions regularly and ensuring trustees receive them on time.

They are also required to provide all the administrative and accounting services required to enable an employee join and contribute to a personal pension scheme.

What do trustees and the various service providers get for the services they provide?

They are paid asset based, negotiated fees which are subject to maximum limits prescribed by the board.

Can an employee ever lose his/her contributions as a result of poor investment decisions?

The three tier pension scheme is heavily regulated by the national pension regulatory authority. They have designed investment guidelines which are meant to provide a high level of security to pension funds.

Nonetheless approved trustees have the fiducial responsibility to ensure that they strictly follow the guidelines and investment best practices to ensure the preservation of capital.

What are the benefits of the three tier pension scheme?

Tax relief: The law allows up to 35% of an employee’s income to be treated as deductible income if set aside for as contributions to pension funds. In other words the towards retirement 13.5% contributed to Tier, 5% to tier 2 and up to 16.5% to tier of your basic salary is treated as tax exempt. This far outweighs any investment vehicle in first years of investment.

Transparency: One of the key elements of the reforms is to give employees greater transparency and accountability with regards to their pension.

Security: The main objective of the three-tier pension scheme is to provide for pension benefits that will ensure retirement income security for workers.

Who are the various service providers and what are their roles?

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PENSION

Pension Schemes are important long term investment vehicles for workers and have been the subject of debate all over the world. All Societies ought to address the question of how to look after workers who have retired and the elderly.

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Branches

TEMA
Denovo Plaza
Tema comm.10, Tema General Hospital Rd.
Tel: 0303 219 615 / 0303312437

KUMASI
Vanguard Building
Near COCOBOD Jubilee House
Tel:+233-0501481226

TAKORADI
2nd Floor of Conship Building
Kofi Annan Road, Opposite Bank of Ghana
Takoradi
Tel:+233-0501481227

Contact Us

 Office Location
VANGUARD HOUSE
NO. 21 INDEPENDENCE AVENUE
RIDGE, ACCRA
PMB 108, AIRPORT
ACCRA – GHANA

Phone:+233-302-251101/2
+233-0201823991
+233-0201823943

Call Center: 0302-208-042 / 0242-436-880

– 050 152 3461
Email: info@upt.com.gh

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