We have been looking at ways to ensure that your retirement is a worthy one. Earlier discussions though not very exhaustive have looked at how we make the most of the financial arrangements we have made for our retirement. The two most important lessons have been;
i. start planning early and not waiting till e.g. you hit the fifties, it may be too late
ii. look after the plans and monitor them continuously
The various risks that exist for retirement plans drive them to provide retirement income less than originally expected. It is a practical situation that needs attention.
One potent means to avert erosion of expected benefits is to possess some basic knowledge of how things work, and then apply the knowledge to guard against the said erosion. The articles in this column are aimed at throwing some basic knowledge on pensions that would equip the reader to look after their retirement plans. Obviously being quite a technical area you may have to be prepared for a few jargons. Here are a few (which have been already mentioned anyway). The defined-benefit scheme gives us retirement benefit worked out by a pre-defined formula based on level of contributions and length of contributions. It is therefore important to know how much of your salary has been stated as pensionable salary out of which contributions are paid. You may receive a total wage of say Ghs2,100 per month but your pay slip may show a gross of Ghs1,300 which forms the basis for taxes and pension contributions, while the Ghs800 is paid as allowances which may not be taxed. The Ghs1,300 would form the basis of pension contribution and therefore pension benefit. It may look beneficial now because it places more funds in your hands now, but really future financial provision is being sacrificed. It may not be bad as such but it is good that we know how it works so we can create realistic expectations for retirement income. Secondly, due to the fact that the length of contribution period forms part of benefit determination, one has to ensure that contributions are up-to-date for the entire period one has been employed for. The very common occurrence is where people move between jobs and just take it for granted that contributions would continue seamlessly. The new organisation should process for continuity but you need to check and ascertain that old contributions are up-to-date and that the platform is set for new contributions to continue. Ensure that the old SSNIT number is working or if there is a new SSNIT number, old contributions are ported. It is your responsibility! It is possible that contributions could be diverted into another account that may be lost and never be reconciled as part of benefits. If you discover that an old employer hasn’t remitted contributions to the pension funds, please take them on because they are holding your funds! Both SSNIT and NPRA would support your course. For defined-contribution schemes please check your statements regularly, at least twice a year. Not too much to do here.
The average pension contributor of private pensions in the western world would demand to know even the investment portfolio, their performance and their charges. The more savvy ones could go on and request for actuarial projections of their schemes. This is not the case in our part of the world and understandably so because pensions development has only very recently started in Ghana. In a recent seminar I held for 35 people, only nine (9) had checked their pension contribution status in the last two years while only six (6) knew who their trustees were. It is familiar? It is absolutely very important to have a fair idea of what is going on with your pension plans. Follow up on your pension schemes to ascertain the correct contributions as well as the scheme’s performance. Early detection of any anomaly with your schemes would receive early attention to bring things in line. That is how you take control of your pension and that is how you can retire richly.
Author: Yaw Korankye Antwi
The author is a Pensions Expert and a Certified Risk Management Professional. He provides
content for the business website www.ghanatalksbusiness.com. Listen to Pension and Business
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