s Department (CAGD) is indebted to public sector workers to the tune of GH¢300 million. This is partly making it difficult for the National Pensions Regulatory Authority (NPRA) to conclude the reconciliation processes needed to ensure the smooth transfer of the tier-two pension contributions from a Temporary Pension Fund Account (TPFA) at the Bank of Ghana (BoG) to registered custodians for subsequent management. The CAGD’s indebtedness also contravenes the National Pensions Act, 2008 (Act 766) which mandates employers – both private and public – to deduct five per cent of the monthly salaries of their employees and pay same into the second tier mandatory occupational pension scheme, currently in a temporary account at the BoG. The law requires that the deductions and subsequent payments should be done within 14 days from the end of every month. However, GRAPHIC BUSINESS investigations revealed that the CAGD, which handles the salaries and emoluments of all public sector employees on behalf of the Ministry of Finance and Economic Planning (MOFEP), had not paid the contributions of employees between September 2013 and September this year, despite routinely making the deductions on a monthly basis. The departments failure to remit the deductions within the period is an offence under the Pensions Act, which reformed the industry with the introduction of a three-tier scheme. Section 10 of the act says, an employer who fails to remit total contributions within the time stipulated commits an offence and is liable on summary conviction to a fine of 2,000 penalty units or to a term of imprisonment for two years or to both. The paper has also learnt that the government is currently in the process of issuing bonds to defray the arrears, in line with pledges made to labour during negotiations. “It is a fact that the government’s contributions are in arrears and it keeps assuring us that it will pay, yet nothing happens. We even raised the issue at the tripartite level during our negotiations with the government, but as we speak nothing has happened,” a source with deep knowledge on the issue told the GRAPHIC BUSINESS. “The assurance was that the government will issue bonds to pay and we are hoping that it will do that soon,” it added. Liquidity issues The five per cent contributions are to be held by the pension fund custodians and managed by fund managers selected by the relevant corporate trustees. The trustees, on the other hand, are to be selected by the various employers on behalf of their employees, the new law, which came into effect in 2010, says. The said contributions totalled GH¢1.1 billion as of December last year and are now being prepared for disbursement to the various schemes after the NPRA had concluded the reconciliation and auditing process. Therefore, should the NPRA decide to transfer the funds from the TPFA to the respective custodians for onward management, the funds for the affected public sector workers will be short of the 12-month contribution, which amounts to the GH¢300 million. The affected workers comprise all employees of public sector institutions. They totalled 442,365 as of July this year, data from the Social Security and National Insurance Trust (SSNIT) showed. The CAGDs inability to remit the contributions has affected the amount the workers will earn on their contributions, given that the said funds have not been invested and will, therefore, not yield returns. The reason for the delayed transfer of the contributions is not readily known. However, a pension industry expert, Mr Evron Rothschild Hughes, said in an interview that it could be as a result of liquidity challenges facing the government. Mr Hughes, who is the CEO of Cambridge Capital Advisors Limited, said given that the deductions were done on paper and not in cash, it was possible the government only paid the affected workers minus the said amounts, yet lacked the funds in real cash to pay on their behalf. As is similar to all such notional deductions, the remittance and payment of the deductions rely on liquidity. By notional deductions, I mean paper deductions. The funds are not being received from the workers per se; they are only given their salaries less the amounts deducted on paper. “Given that the government, which is the principal employer of public sector workers, has had major issues in meeting many of its statutory obligations due to the lack of funds or liquidity issues, it is not surprising that the deductions are not remitted, he said in an e-mail response. Statutory funds such as the Ghana Education Trust Fund (GETFund), the District Assemblies Common Fund (DACF), the National Health Insurance Fund (NHIF) and the Road Fund are currently in arrears due to the government’s inability to raise enough revenue to meet rising expenditure. NPRA wants govt intervention When the GRAPHIC BUSINESS contacted the NPRA, which regulates the pensions industry, for its comment on the matter, the authority declined to grant an interview, insisting that it would make its stance public at the right time. The same applied to the CAGD. The paper, however, learnt that the NPRA had drawn the government’s attention to the CAGD’s indebtedness, explaining that the development was fueling the current mistrust of the authority by public sector workers. “The concern was that if the NPRA transfers the funds now, it will be without the GH¢300 million and that will be a problem because what it means is if the arrears finally comes, then the authority will have to carry out another round of auditing in order to reconcile the figures before it can disburse. “If the NPRA also waits on the CAGD to pay before it can transfer the funds, it will not be sure when that payment will come for the disbursement to take place,” a source closer to the discussions told the paper. “So what the NPRA did was to tell the government to impress on the CAGD to transfer the funds quickly, so that it can proceed,” the source added, while pleading anonymity. Raging controversy The GRAPHIC BUSINESS’s revelation on the CAGD’s indebtedness comes in the wake of heightened agitation by public sector workers regarding the transfer and management of their second tier contributions. Currently, 12 labour unions, comprising unionised staff in the health, education, commerce and the judicial services, are on an indefinite strike in protest against the government’s decision not to allow them to privately manage their own tier-two contributions. The strike is also in protest against the delayed release of their tier-two contributions to custodians for management, an issue the NPRA said it was working to resolve. When contacted, the General Secretary of the Trades Unions Congress (TUC), Mr Kofi Asamoah, said although he shared in the concerns of the striking workers, it was better for them to resort to dialogue in finding an amicable solution to the matter, instead of resorting to strikes. “Strikes will bring untold hardship on ordinary people. The best, to me, is for us to come together and dialogue, so that we can even use this opportunity to address all the concerns in the industry,” he said, in reference to the delayed release of the funds from the TPFA at the BoG. “The more that money stays in the temporary account, the less beneficiary it is to workers because it cannot earn interest above Treasury bill rates. “I think it will be better we rather used dialogue to get all these things addressed, instead of the strike which may not solve any issue,” he added.
Posted on: Wed, 29 Oct 2014 10:30:25 +0000
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