There are two press releases circulating on Casual Sector Pensions dated 26/08/2024 and 30/08/2024 issued by the Nationwide Pensions Regulatory Authority (NPRA), bringing to the eye of most people that casual sector pensions exist already. Within the 30/08/2024 press launch, the NPRA instantly linked casual sector employees to self-employed individuals, stating:
“…the brand new Pensions legislation has supplied alternatives for self-employed individuals (casual sector employees) to voluntarily contribute in direction of their pensions.”
Moreover, the NPRA related Private Pension Schemes with the casual sector, highlighting that:
“as on the finish of the second quarter of 2024, a complete of twenty-six (26) Tier 3 Group Private Pension Schemes and Private Pension Schemes have been registered by the NPRA, focused primarily at casual sector employees and are managed by licensed trustees.”
Moreover, the NPRA linked the SSNIT Self-Employed Enrolment Drive (SEED) to the casual sector by stating:
“The general public can also be knowledgeable that the Social Safety and Nationwide Insurance coverage Belief (SSNIT), in accordance with part 58(c) of Act 766, launched the Self-Employed Enrolment Drive (SEED) final 12 months, to increase social safety protection to employees within the casual sector.”
It’s essential to look at how this classification aligns with the intent of the pension legal guidelines because it has vital implications for coverage implementation.
The NPRA’s classification, which mixes Private Pension Plans and SSNIT’s self-employed protection (SEED) beneath the casual sector umbrella, undermines the intent and spirit of casual sector protection per the pension legal guidelines that it’s meant to uphold.
The pension legal guidelines had been crafted to differentiate between completely different classes of employees, and the broad classification utilized by the NPRA dangers conflating the regulated, formal self-employed corresponding to attorneys, accountants and consultants with the unregulated, financially unsophisticated self-employed such because the coconut vendor and feminine porter (Kayayo).
You will need to notice that whereas all Group Private Pension Schemes are designed as casual sector pensions, not all Private Pension Plans are stricto sensu casual sector.
As an example, if the CEO of NPRA decides to contribute to a Private Pension Plan beneath Tier 3, he shouldn’t be categorized as a casual sector contributor for the aim of economic inclusion.
The goal of the casual sector pensions for monetary inclusion functions, as per the Nationwide Pensions Act, 2008 (Act 766) and the associated Legislative Devices 1989 (Tier 1) and 1990 (Tier 2 and three), will not be professionals like attorneys, accountants, consultants, or employees within the formal sector who voluntarily contribute to non-public pensions.
These professionals, though they might decide into Tier 3 Private Pension Plans or the SSNIT SEED, must be handled as distinct from casual sector employees such because the plantain and koko vendor. The legislation clearly intends to distinguish between these teams, significantly when discussing initiatives geared toward selling monetary inclusion throughout the casual sector.
This text will use provisions of the Nationwide Pensions Act, 2008 (Act 766) and the associated Legislative Devices (L.I.1989 for Tier-1) and (L.I. 1990 for Tiers-2 and three) to show that the intent of protection for casual sector pensions, significantly regarding monetary inclusion, is supposed for unregulated employees.
It’s going to additionally distinguish between the formalized, regulated financially refined self-employed, who’re extra structured of their enterprise to plan their retirement and the casual, unregulated, financially unsophisticated self-employed, who’re the true focus of pensions inclusion efforts.
The article will argue that conflating these distinct teams throughout the casual sector basket is in opposition to the spirit of the legislation and will result in ineffective pension coverage implementation. Moreover, suggestions shall be offered on learn how to higher align pension insurance policies with the distinctive wants of each formal self-employed professionals and the focused casual sector employees.
GENERAL UNDERSTANDING OF THE INFORMAL SECTOR AND THE SELF-EMPLOYED
There are numerous approaches to categorizing the casual sector, however for the needs of this text, I’ll use the “Enterprise Method” and the “Labour Method.”
- Enterprise Method: This strategy focuses on the traits of the manufacturing models, dimension of enterprises, and the place of job the place actions happen, sometimes known as “employment within the casual sector.” Examples embody construction of the enterprise, sole proprietorship or partnerships. These are sometimes small-scale enterprises with restricted formal construction.
- Labour Method: This strategy focuses on the traits of the individuals concerned or their jobs, distinguished as “casual employment.” It considers the character of the employment relationship and the extent of protections related to the job of the employee. Examples embody masons, carpenters, and labourers.
The Worldwide Labour Convention (ILC) in 2002 used the time period ‘casual financial system’ to consult with “all financial actions by employees and financial models which can be – in legislation or in follow – not coated or insufficiently coated by formal preparations.” Based on Hart (1973), the casual sector refers to “unregulated financial enterprises or actions.”
Self-employed then again, refers to people who work for themselves fairly than being employed by an organization or one other individual. They sometimes run their very own companies, function as freelancers, or have interaction in trades or professions the place they’re chargeable for producing their earnings. Self-employed people handle their very own enterprise operations, make their very own selections, and are instantly accountable for his or her income or losses.
In authorized and tax contexts, being self-employed implies that the person should report their earnings, deal with their very own taxes. Self-employed people may additionally have extra flexibility and management over their work however don’t normally have the advantages offered to staff, corresponding to medical health insurance, retirement plans, or paid go away.
From the above, can or not it’s mentioned that the lawyer operating her personal chamber is self-employed? and what in regards to the plantain and koko vendor? Can it even be mentioned that each the lawyer and plantain vendor are each within the casual sector? Now for the needs of Ghana’s pension area, that is the faint distinction that needs to be made to understand the main focus of casual sector pensions inclusion throughout the complexities in categorizing several types of work inside authorized and social frameworks for the needs of economic inclusion coverage formulation.
LEGAL FRAMEWORK AND SSNIT’S ROLE IN SERVING THE SELF-EMPLOYED
The Nationwide Pensions Act, 2008 (Act 766), established a complete three-tier pension system in Ghana, designed to supply retirement advantages for employees throughout varied sectors. The primary tier, managed by the Social Safety and Nationwide Insurance coverage Belief (SSNIT), is necessary for all formal sector staff and gives fundamental social safety advantages.
The second tier, managed by personal trustees, can also be necessary and presents extra retirement earnings. The third tier, which is voluntary, is particularly designed to cater to casual sector employees and self-employed people, offering them with versatile choices for retirement financial savings.
With this authorized framework in place, the position of SSNIT turns into essential, significantly in the way it serves completely different classes of self-employed people beneath the pension scheme.
SSNIT’s main mandate beneath Act 766 is to handle the first-tier fundamental nationwide social safety scheme, which operates on an outlined profit foundation. The scheme is structured round common contributions, with advantages calculated primarily based on the employee’s contributions and the variety of years they’ve contributed. This mannequin is well-suited to formal sector staff who’ve constant earnings and might adhere to the common contribution schedule.
For self-employed people, significantly these beneath the “enterprise strategy,” SSNIT presents an choice to voluntarily be a part of the scheme. Regulation 11 of L.I. 1989 outlines the obligations for these self-employed people concerning the fee of contributions:
- Cost Deadlines: Self-employed individuals who decide to hitch the scheme should pay their contributions inside fourteen days after the agreed interval. This ensures common and well timed contributions, important for the sustainability of the pension fund.
- Voluntary Contributions: People who proceed contributing after ceasing formal employment, or who’re self-employed, should adhere to the identical fee schedules. This provision permits professionals who begin their very own follow, corresponding to attorneys or accountants, to keep up their pension contributions.
- Penalties and Arrears: Penalties apply for late funds, and the Belief won’t settle for arrears over twelve months from self-employed individuals. This regulation emphasizes the expectation that self-employed professionals will handle their contributions responsibly.
Regulation 2.3 of L.I. 1989 additional helps the give attention to regulated self-employed people by requiring that any self-employed one that adjustments their enterprise identify, handle, or location should notify the Director-Normal inside ten days. This regulation clearly targets self-employed people with formal enterprise buildings—corresponding to attorneys, accountants, or consultants—who function beneath the “enterprise strategy.” These people sometimes have a proper enterprise identify, bodily handle, and a structured operation, distinguishing them from casual employees like a coconut vendor and Kayayo, who would not have such formalized enterprise buildings.
These laws, together with SSNIT’s structured scheme, clearly point out that SSNIT is healthier suited to serve self-employed people who observe the ‘enterprise strategy.’ These are people with formalized companies, constant earnings, and the power to handle common contributions. These regulated, formal self-employed people align with the operational and regulatory expectations of SSNIT.
In distinction, the “labour strategy” to self-employment—typified by casual employees engaged in unregulated financial actions with irregular earnings—doesn’t align with SSNIT’s structured necessities. These employees are extra appropriately served by Tier 3 pension schemes, which provide the required flexibility.
L.I. 1989 focuses on formal sector employees and self-employed people who select to hitch the SSNIT scheme voluntarily, however it doesn’t point out or particularly handle the casual sector. This lack of express point out or tailor-made provisions makes the regulation much less appropriate for casual sector employees, who sometimes require extra versatile contribution preparations because of the nature of their work and earnings patterns. In impact, whereas SSNIT’s structured strategy works properly for regulated, formal self-employed people, the flexibleness of Tier 3 scheme is healthier suited to the wants of the unregulated, casual employees.
THE ROLE OF L.I. 1990 IN SUPPORTING INFORMAL SECTOR PENSIONS
L.I. 1990 (Occupational and Private Pensions Rules) was particularly crafted to cater to the wants of casual sector pensions. It expands on the third-tier pension schemes, that are voluntary and designed to supply versatile choices for people within the casual sector.
Key Causes:
- Flexibility in Contributions: L.I. 1990 outlines provisions for versatile contribution schedules, that are important for casual sector employees who usually have irregular earnings patterns. This flexibility permits employees to contribute in keeping with their monetary skill with out the inflexible necessities of standard contributions discovered within the formal sector.
- Group Pension Schemes: The regulation permits for the creation of group pension schemes, that are well-suited for casual sector employees who may be a part of associations or cooperatives. These group schemes present a collective strategy to retirement financial savings, making it simpler for employees to take part.
- Private Pension Schemes: L.I. 1990 additionally gives for private pension schemes that may be tailor-made to particular person wants, providing extra management and flexibility for casual employees. These schemes permit for customized retirement planning, which is essential for many who would not have a proper employer.
In distinction:
L.I. 1989 (Primary Nationwide Social Safety Rules) governs the administration of the first-tier pension scheme managed by SSNIT, which is necessary for formal sector employees. This regulation is extra inflexible and caters primarily to formal sector staff. Whereas self-employed people can voluntarily take part within the first-tier scheme, L.I. 1989 doesn’t impose necessary participation on them. Nevertheless, if the self-employed select to hitch, they need to adhere to the identical guidelines as formal sector employees concerning registration, contributions, and advantages. The inflexible construction of the contributions and strict laws, corresponding to penalties for late funds, make L.I. 1989 much less appropriate for casual sector employees who sometimes have irregular earnings patterns.
Due to this fact, L.I. 1990 is the regulation that was crafted with a give attention to addressing the wants of the casual sector, offering the required flexibility and choices to incorporate these employees in Ghana’s pension system. This additional helps the argument that SSNIT’s involvement in casual sector pensions must be restricted, as their scheme doesn’t present the flexibleness required for these employees.
NPRA’s CLASSIFICATION OF SEED AS INFORMAL SECTOR
By aligning the SSNIT self-employed scheme (SEED) with casual sector pensions, the NPRA might inadvertently create a framework that’s much less optimum for casual sector employees. The pension legal guidelines, when thought-about as a complete, search to differentiate between formal self-employed people and casual self-employed employees, although this distinction might generally be tough to keep up. Nevertheless, guaranteeing this distinction in follow is crucial to make sure that every group is served by the pension scheme greatest suited to its wants.
Classifying SEED beneath the casual sector displays SSNIT’s historic follow, the place all classes of the self-employed had been included beneath the casual sector. SSNIT used to run a casual sector scheme beneath the previous and repealed Social Safety Act, 1991 (PNDCL 247), however the passing of Act 766 moved casual sector pensions to Tier 3 of the three-tier pension scheme.
Regardless of this, the follow of grouping all self-employed people beneath the casual sector classification should persist. This contributes to a regulatory and coverage hole, because the legislation has now shifted its focus to the unregulated self-employed for casual sector pensions, primarily beneath Tier 3. These practices could also be persevering with because of institutional inertia, as organizations usually take time to completely adapt to legislative adjustments.
On this new dispensation, if SSNIT chooses to proceed serving self-employed people who go for Tier- 1, it should consider the regulated, formal self-employed beneath the “enterprise strategy”. These are people who, regardless of being self-employed, function in a structured and formalized method, making them extra suitable with SSNIT’s necessities.
In the meantime, the casual, unregulated self-employed beneath the “labour strategy” can be higher fitted to Tier 3 pension schemes, that are designed to accommodate their want for flexibility. NPRA classifying SEED beneath casual sector over estimates the reporting figures for resolution making.
THE PRESS RELEASES
· Timing and Notion
The timing of the 2 press releases from the Nationwide Pensions Regulatory Authority (NPRA) raises questions on their intent and the urgency behind them. The primary press launch, dated 26/08/2024, seemed to be a response to the NDC manifesto, launched on 24/08/2024, which promised a particular pension scheme initiative, “Mo-Ne-Yo,” for casual sector employees.
This notion is strengthened by the opening assertion of the press launch, which reads, “The Nationwide Pensions Regulatory Authority’s (NPRA) consideration has been drawn to some media reviews on the proposed institution of pension schemes for Cocoa farmers, Industrial drivers, Merchants, Market ladies, and different casual sector teams and self-employed individuals.
” Moreover, the final paragraph asserts, “It’s subsequently misplaced to make statements suggesting that there aren’t any pension schemes for casual sector employees and that pension schemes shall be arrange for casual sector employees.”
Even when the releases had nothing to do with the NDC manifesto, a well-thought-out company communication technique would have averted this case, because it raises issues that the NPRA was responding swiftly to political developments.
Notion is crucial in defending the model picture of any group and avoiding reputational danger. A regulator doesn’t promote bodily items however fairly a picture of belief, integrity, and equity to all stakeholders—a picture that have to be fastidiously guarded.
The timing of those releases, mixed with the errors within the first, gives the look of a hasty response to the NDC manifesto. By showing to react to political developments, the NPRA dangers being seen as politically influenced. That is damaging for a regulatory physique, which is predicted to function independently and impartially. This urgency to reply was pointless, and the reputational danger it poses to the NPRA, particularly after the approval of the controversial sale of SSNIT lodges, may have been averted.
·Communication Technique
The language and selection of phrases used within the 30/08/2024 press launch, corresponding to ‘well-meaning Ghanaians,’ recommend a communication model which may be perceived as extra political than company. For a regulatory physique, sustaining a tone of neutrality and professionalism is essential, as any notion of bias can undermine public belief.
Whereas encouraging public participation in pension schemes, the NPRA must also have interaction constructively with all teams, together with political events, that suggest initiatives to boost pension inclusion.
As public servants, the NPRA ought to foster a collaborative surroundings the place modern concepts are welcomed and assessed on their deserves, guaranteeing the main focus stays on broadening pension protection fairly than showing to undertake a politically aligned stance. If casual sector pensions are to be reported, full disclosure with exact knowledge separation is crucial for stakeholders to completely perceive their influence.
The NPRA’s press releases create an impression that casual sector pensions are performing exceptionally properly, citing an Belongings Underneath Administration (AUM) of GHS 858.9 million with 747,705 members beneath Tier 3 pensions and SSNIT’s Tier 1 AUM of GHS 52.6 million with 103,292 members as of June 2024.
Nevertheless, to correctly analyse and recognize these AUM figures, it’s vital for the NPRA to separate the figures of group pensions, which signify the casual sector correct, from private pensions.
Moreover, inside private pensions, the NPRA ought to distinguish between contributors from the formal financial system—whether or not they’re self-employed professionals corresponding to attorneys, accountants, and consultants, or in formal employment, corresponding to workers of the NPRA—and contributors who signify the true goal for casual sector pensions inclusion, corresponding to desktop MoMo brokers and canine chain sellers. The SSNIT figures must also be separated in the identical method to know which group of self-employed they’re concentrating on. This separation is essential for informing coverage course on monetary inclusion.
The press launch dated 30/08/2024 additionally listed varied casual sector schemes, figuring out the schemes and their related membership teams. Nevertheless, it fell wanting offering the variety of members for every scheme, the related AUM, and whether or not these members are energetic or inactive.
Merely reporting combination AUM and membership numbers with out additional breakdowns doesn’t present a full or correct image. Together with this info would have demonstrated a dedication to good info symmetry, providing transparency and a fuller image of the state of casual sector pensions in Ghana. Such detailed reporting would permit all stakeholders to have higher insights into the present state of casual sector pensions and make extra knowledgeable selections.
Understanding the proportion of self-employed people from the formal sector who’re in energetic employment or professionals categorized as casual sector pensions is crucial. As an example, if H.E. John Mahama decides to make a contribution to a Tier 3 private pension, that contribution doesn’t signify the casual sector as envisaged by the pension legal guidelines, nor does it align with the ‘Mo-Ne-Yo’ initiative being proposed by the NDC.
It might be inaccurate to categorise the contribution of H.E. John Mahama alongside that of a coconut vendor in a private pension, each beneath casual sector pensions in Tier 3 for monetary inclusion coverage formation. Grouping collectively contributions from such completely different social lessons distorts the image of how properly the casual sector is being served by pension schemes.
The NPRA ought to incorporate knowledge analytics to interrogate these figures and assist enterprise coverage selections, enabling the actualization of their mandate. Grouping AUM figures solely in keeping with authorized classification with out additional evaluation by social class doesn’t present the required insights for efficient policy-making.
· Engagement with Proposals
The NPRA, because the regulator, ought to have explored the potential advantages of the “Mo-Ne-Yo” initiative, particularly if the NDC intends to amend sure elements of the prevailing legislation to advertise and encourage pension inclusion, a mandate of the NPRA. As a substitute of dismissing new proposals outright, the NPRA ought to have engaged extra constructively with the NDC’s “Mo-Ne-Yo” initiative, because it may supply precious improvements in pension inclusion. Whereas there are generic “vanilla” monetary merchandise, monetary establishments usually differentiate their choices with distinctive options. The pensions sector is not any completely different and might profit from innovation.
The problem now could be, ought to the NDC win the upcoming elections, how does the administration of the NPRA intend to champion the course of a brand new authorities initiative as public servants? This situation underscores the necessity for regulatory our bodies to stay impartial and open to engagement, whatever the political panorama.
RECOMMENDATIONS
To deal with the problems raised on this article, I like to recommend the next:
- Enhanced Disaggregated Casual Sector Knowledge Reporting and Transparency: Within the April 2024 version of the Pensions Digest, the official e-newsletter of the NPRA, personal pension funds had been reported at GHS 50.706bn by the final quarter of 2024, with Tier 3 contributions accounting for GHS 16.493bn (33%).
Nevertheless, Tier 3 consists of Provident Funds, Particular person Private Pensions, and Group Pensions, all aggregated collectively with out distinguishing the contributions of casual sector employees. Casual sector contributors had been reported as 679,105, combining SSNIT, Group Pensions, and Particular person Private Pensions.
This lack of differentiation makes it tough for stakeholders, corresponding to researchers and trustees, to precisely perceive the true extent of casual sector participation, which hinders efficient coverage formulation and strategic planning.
To deal with this, the NPRA ought to undertake a extra detailed and clear strategy to reporting Belongings Underneath Administration (AUM) and membership knowledge. This consists of disaggregating figures for Group Pensions—particularly designed for the casual sector—from private pensions.
Moreover, inside private pensions, it’s important to differentiate between contributors from the formal financial system—corresponding to self-employed professionals and staff in formal employment—and people from the true casual sector, as envisioned by Act 766 (corresponding to small-scale merchants and artisans).
Offering this degree of element will give stakeholders a clearer and extra correct understanding of the state of casual sector pensions in Ghana, enabling better-informed coverage selections and more practical strategic planning. With out this degree of disaggregation, sources could also be misallocated, and insurance policies might fail to deal with the precise wants of the casual sector.
- Undertake a Impartial and Skilled Communication Technique: The NPRA should refine its communication technique to make sure that its messaging stays impartial, skilled, and aligned with its position as a regulator. Language that might be perceived as politically charged must be averted. As a substitute, the NPRA ought to give attention to clear, fact-based communication that upholds a picture of belief, integrity, and equity.
By maintaining its messaging clear, fact-based, and politically impartial, the NPRA can defend its repute, keep public belief, and keep away from potential conflicts or misinterpretations that will come up from poorly framed communication. As a proactive step, the NPRA may repeatedly replace its web site with related statistics and data on the casual sector, making it accessible to any stakeholder who seeks such knowledge.
- Constructive Engagement with Stakeholders: The NPRA ought to proactively have interaction with all stakeholders, together with political events, civil society teams, {and professional} associations, to grasp and incorporate modern concepts into its regulatory framework. For instance, as an alternative of dismissing the NDC’s “Mo-Ne-Yo” initiative outright, the NPRA may have engaged in discussions to discover its potential advantages and the way it would possibly complement current pension schemes. This might assist the NPRA decide whether or not such initiatives may complement current pension schemes, making the system extra complete and inclusive.
This collaborative strategy wouldn’t solely foster innovation within the pensions sector but in addition reinforce the NPRA’s dedication to inclusivity and monetary protection for all segments of the inhabitants.
- Coverage Growth and Innovation: The NPRA ought to take into account how current pension legal guidelines and laws may be up to date or amended to raised serve the evolving wants of the focused casual sector. The casual sector shouldn’t be homogenous, so recognizing the distinct monetary realities of various teams—corresponding to small-scale merchants versus self-employed professionals like attorneys or consultants—is crucial for creating tailor-made pension merchandise that cater particularly to their distinctive wants. By embracing innovation and dealing carefully with stakeholders, the NPRA can improve its regulatory framework and assist the event of pension merchandise that drive higher monetary inclusion.
- Dedication to Monetary Inclusion: The NPRA should reaffirm its dedication to monetary inclusion by guaranteeing that its insurance policies and actions are really aligned with the wants of Ghana’s most weak and underserved populations. This implies specializing in extending pension protection to the unregulated, financially unsophisticated self-employed people who’re presently excluded from the formal pension system. The NPRA must also discover how knowledge analytics and Synthetic Intelligence (AI) can be utilized to establish gaps in protection. These applied sciences can present insights into underserved populations, serving to the NPRA develop focused insurance policies that instantly handle these protection gaps and be sure that all segments of society are included.
CONCLUSION
The NPRA’s latest actions, significantly its press releases on casual sector pensions, spotlight the necessity for a extra nuanced and strategic strategy to regulating and selling pension inclusion in Ghana. Whereas the NPRA has made strides in extending pension protection, there stays a crucial have to differentiate between the assorted classes of employees and to develop insurance policies which can be really reflective of their distinctive circumstances.
The authorized framework established by the Nationwide Pensions Act, 2008 (Act 766), and the related Legislative Devices, was designed to supply a structured strategy to pension protection, guaranteeing that every one employees, together with these within the casual sector, have entry to monetary safety in retirement. Nevertheless, the broad classifications and combination reporting utilized by the NPRA danger undermining the effectiveness of those legal guidelines. By failing to differentiate between formal self-employed professionals and unregulated casual employees, the NPRA might inadvertently create coverage blind spots that might go away vital parts of the inhabitants underserved.
To deal with these challenges, the NPRA should embrace a extra detailed and clear strategy to knowledge reporting, undertake a communication technique that displays its position as a impartial regulator, and have interaction constructively with all stakeholders to foster innovation within the pensions sector. By doing so, the NPRA can strengthen its regulatory framework, improve public belief, and fulfil its mandate to advertise monetary inclusion for all Ghanaians.
The NPRA’s skill to navigate these challenges won’t solely decide the success of present pension initiatives but in addition form the way forward for monetary safety for thousands and thousands of Ghanaians.
As a regulatory physique, the NPRA should stay dedicated to its core values of Professionalism—demonstrating competence, self-discipline, dedication, and common sense; Integrity—upholding excessive ethical requirements and confidentiality; Consistency—guaranteeing the truthful software of guidelines and laws throughout the pensions business always; Teamwork—attaining synergy by way of session and collaboration; Excellence—selling greatest practices always; and Accountability—embracing its mandate and demonstrating accountability.
By dwelling these values, the NPRA can be sure that Ghana’s pension system not solely meets present wants but in addition adapts to future challenges, offering safety for all employees.
The writer is a Chartered Banker, holds Submit Graduate Diploma in Monetary Administration (ACCA) and an LLB. He was the previous CEO of Nationwide Pensions Regulatory Authority (NPRA). (Contact: kofianokye18@gmail.com)