What Teachers should know about the Tier-1,Tier-2 and Tier-3 Pension scheme


A pension scheme is simply a type of savings plan to help you save money for later life. And there are tax advantages compared with other types of savings. It is just a pot of cash that you, and your employer, can pay into and which you get tax relief on as a way of saving up for your retirement. Then, at retirement, you can draw money from your pension pot or exchange the cash with an insurance company for a regular income until death, called an annuity. There are three tier pension plan in Ghana, these are first tier, second tier and third tier. 

First tier, is a mandatory basic national social security scheme for all workers in the country, A mandatory contributory scheme with monthly contributions of 13.5% (11% towards monthly pensions and 2.5% contribution to NHIS) on the basic salary of all employees. Tier 1 is a defined benefit scheme and contributions are fully tax-exempt and are managed by SSNIT. All employees are registered under the Scheme, make regular contributions on behalf of the workers to SSNIT, they deduct 5.5% of the workers salary every month and add 13% of worker's basic salary to make 18.5%. Out of the 18.5% the employer is to remit 13.5% to the Trust within 14 days of the ensuing month.

Second tier, a mandatory occupational pension scheme that is fully funded and privately managed. Teachers Tier 2 contributions are managed by Ghana Education Service Occupational Pension Scheme (GESOPS).

Second tier is a defined benefit plan that provides pension benefits based upon final pay and years of service. This plan provides service, disability, and survivor pension benefits as well as retiree health insurance subsidies to eligible sworn members and certain qualified survivors.

Tier 2 is a mandatory contributory scheme with monthly contributions of 5% on the basic salary of all employees. Tier 2 is a defined contribution scheme and contributions are fully tax-exempt and are privately managed by National Pensions Regulatory Authority (NPRA) licensed service providers. Member cannot withdraw part of his contribution because again it is not a saving scheme. The contributions have to be made over a period of time and invested to enable the scheme pay out the benefits guaranteed under the scheme.

Tier 3, a voluntary provident fund and personal pension scheme also fully funded and privately managed, workers have option to select which fund manager to manage his or her Tier 3 contributions. If a worker retired, SSNIT pays only the monthly pension of the beneficiary and the fund managers who manage the second Tier with the 5% contribution rates will pay the lump sum. Average Salary multiply by Pensionable Service divided by 70 where, Average Salary means the average of the Basic Salary + DA combined, drawn in the last 12 months, and. Pensionable Service means the number of years worked in the organized sector after 15th November, 1995.

By Nedved 

Nedved newshub-gh@operanewshub.com