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> Retirement
Contributions ( Section 3 of Pension Act)
3-Tier Pension

The new Pension Act provides for pension in the country through the introduction of a contributory three-tier pension scheme, the establishment of a National Pensions Regulatory Authority to oversee the administration and management of registered pension schemes and Trustees of registered schemes as well as the re-establishment of a Social Security and National Insurance Trust to provide for related matters.


The new and improved 3-tier concept of the reform is meant to provide more options for people to plan for their retirement.  The objectives of the Pension Act are to provide pension benefits to ensure retirement income security for all categories of workers in the country.  It is also to ensure that workers receive retirement and related benefits as and when they are due, and to establish a uniform set of rules, regulations and standards for the administration and payment of retirement benefits for workers, both in the public and private companies and institutions.



1st tier: A mandatory occupational scheme to be run by a restructured SSNIT.  Contributions will be 13.5% of gross salary.  Retirement benefits will be only in the form of monthly income and death & invalidity benefits should a contributor die before retirement.  SSNIT will no longer pay the one-off lump sum benefit at retirement.

It is a Defined Benefit (DB) scheme, which means the level of pension benefits would depend on quantum of contribution, also related to the level of income during the active working years, and the number of years one contributed for.


2nd tier: Also a mandatory occupational scheme to be run by approved Trustees licenced by the regulatory body but managed by private fund managers.  Contributions to the scheme would be 5% of the employee’s gross salary.  Benefits would be lump sum payments which are expected to be higher than presently exists under SSNIT and CAP 30. Being a Defined Contribution (DC) scheme, level of benefits would depend on both level of contribution and returns on investments.  Proceeds could be used to purchase annuities to enhance the monthly benefits or to fulfill any other financial objectives set by the individual.


3rd tier: A voluntary fully funded provident fund and personal pension scheme managed by private fund managers.  An optional scheme for everyone to either top-up their pensions or to use as a sole pension provision.  The guide to contributions would conform to the tax regulations on the Long Term Savings Act now repealed.  The maximum allowable tax relief of 35% on gross earnings would apply.  Each contributor would either be paid a lump sum or monthly pension depending on choice while on retirement by the chosen private fund manager. It means that formal sector employees can only top with 16.5% of gross salary, as 18.5% would already have been paid into 1st and 2nd tiers.

It is also a Defined Contributory (DC) scheme and therefore benefits would depend on contributions and largely on investment returns. Benefits could be used to purchase annuities or deployed for a financial objective.


> The new 3-Tier pension scheme in Ghana


> Guide for Trustees


New Contribution Rates

                Existing     Additional    New Rate

Employer    12.5%    +  0.5%       =  13.0%

Employee     5.0%    +  0.5%       =  5.5%

                   17.5%       1.0%           18.5%


                  (2.5% NHIS Levy; 11% for pensions)

3rd Tier
2nd Tier
1st Tier

Financing of the New 3-Tier Pension Scheme