Companies with existing provident funds have been urged to migrate to the third tier under the new pension scheme to enjoy tax reliefs.
The third tier is voluntary fully funded and privately managed provident fund and personal pension scheme under the new pensions scheme.
The Acting Executive Secretary of the National Pensions Regulatory Authority, (NPRA), Daniel Aidoo Mensah who said this a at a forum in Accra on Monday further said companies with End-of-Service Benefit, (ESB) should convert it to provident fund schemes to quality for tax reliefs.
The forum which was on the theme: “implications and benefits of the new pension scheme with special focus on provident funds schemes,” was to educate companies on the benefits they stand to accrue from the new pension scheme, particularly when they migrate their provident fund to the third tier under the new pension scheme.
Mr Mensah entreated companies without provident funds to establish one under the third tier to enjoy pension benefits.
The Acting Executive Secretary indicated that “adequacy” of a pension benefits is very important, stressing any pension scheme which “ignores the social factor will fall short of pensioners’ expectations.”
He stressed that although a pensioner’s income reduces at retirement, he or she has to attend funerals and meet other social obligations, saying “a pensioner needs more money to meet all these obligations.”
To this end, he said the NPRA has pegged the income replacement ratio above the global standard of 67 per cent and above the SSNIT figure of 65 per cent.
The income replacement ration he said is calculated by dividing ones retirement income by the last monthly salary before retirement.
Outlining the benefits of the new pension scheme, Mr Mensah among other things said contributors who have contributed 15 years for SSNIT benefit instead of 20 years and that survivors benefit period has increased from 12 to 15 years,” he stated.
He noted that contributors under the second and third tier of the scheme can use their lump sum as collateral to secure mortgages.
Mr Kwame Asante, Chairman of the NPRA in his welcome address said pension schemes have been the subject of debate all over the world.
He said the pension scheme could be a source of investment capital for the national economic development for the country as has happened for other countries.
Mr Asante urged companies to modify their current rules to comply with the regulatory requirements of the NPRA.
He further enjoined employees to ensure that they are properly registered by their employers on the new scheme and insist and demand from their employers evidence that deductions and their contributions are faithfully and dutifully paid on their behalf.
Francis E.K Akoto, Chief Tax Inspector of the Internal Revenue Service, speaking on the topic “Tax reliefs under the National Pensions Act, 2008 (Act 766)” said companies could file for tax reliefs for their employers under the new pension scheme.
He said individual employees can not file for tax reliefs.
Mr Akoto said not only would employees enjoy tax reliefs on the Social Security and National Insurance Trust (SSNIT) contribution under the new pension scheme but also on tax reliefs on their Provident Fund, stressing this will ensure adequate pensions for employees.
Participants at the forum raised qualms about why they can not build or purchase a house from their lump sum under the second and third tier but rather have to use it as collateral to secure mortgages.