The Ghana National Association of Teachers (GNAT) has organized a three-day Seminar for its Members In the Central Region.
The Seminar started from Tuesday March 13 to Thursday, March 15,2018 at three different districts under the Awutu-Effutu Secretariat of the Association.
The first Seminar took place at Winneba for members in the Effutu district on Tuesday, March 13,2018.
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The Second Seminar took place at the St. Killion Catholic Church Auditorium at Awutu Bereku for Members from the Awutu Senya West District.
The Final Seminar took place on Thursday ,March 15 at Kasoa for Members in the Awutu Senya East municipality.
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Speaking about the Purpose of Organizing the Seminar on Tier 3 Pension Scheme, the District Secretary of the Association in the Awutu-Effutu District ,Mr Julius Kpodo, indicated that there was the need to create the awareness of members of the Association on the types of Pensions Schemes available to them and the benefits to be derived from the newly introduced Tier 3 Pension Scheme.
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He further explained to members that the Tier 3 pension was an Optional Pension Scheme and not compulsory for members, though it’s usefulness outweighs the decision not to be registered onto it.
Speaking on the Tier 3 Pension was Mr Isaac Tadeku, the Operations Manager of United Pension Trust, managers of the Tier 3 Pension for members of the Association.
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According to him, it was very unfortunate that issues regarding retirement were always left to be discussed by those who were left with few years to retire.
A situation he believed was what prompted them to partner with the Association in order to Educate its members on the preparatory mechanisms regarding pension of the members.
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What is The 3-Tier Scheme
The First Tier is the Basic National Social Security Scheme for all workers in Ghana. It is a defined benefit scheme and mandatory for workers to have 13.5% contributions made on their behalf. The contribution is managed by SSNIT.
The Second Tier is a defined contributory Occupational Pension Scheme mandatory for workers with 5% contribution made on behalf of members.The contribution is managed privately by approved Trustees.
The Third Tier which includes all Provident Funds and all other Pension Funds outside Tiers I and II and is a voluntary scheme.
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The contribution rates and how are they distributed between the Employer and Employee.
Worker – 5.5% of workers’ basic salary
Employer – 13% workers’ basic salary
Total – 18.5% of workers’ basic salary
Out of the 18.5%, employer remits 13.5% to SSNIT within 14 days following the end of the month to the mandatory First-Tier Basic Social Security Scheme.
Again out of the 13.5% paid to SSNIT, 2.5% is sent to the NHIA for the member’s health insurance.
The residual 5% is sent to the mandatory Second Tier Occupational Scheme which will be privately managed by Trustees approved and licensed by the Board of NPRA.
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Overview of The Tier 3 Pension Scheme
This is a voluntary provident fund and personal pension scheme. It is supported by tax benefits to provide additional funds for workers who want to make voluntary contributions to enhance their pension benefits.
Any contribution up to 16.5% of one’s basic monthly salary towards Tier 3 receives a tax break, i.e. income is taxed after Tier 3 contributions.
However, any amount over 16.5% is still considered taxable income. This is one of the many advantages that Tier 3 schemes have over traditional savings products like fixed deposits or mutual funds.
Like Tier 2, this tier is also managed by Private Pension Service Providers(PSPs). Note that tax reliefs are only available for contributions up to 16.5% of the employee’s basic monthly salary. While the employee can choose to contribute above this threshold, the excess does not qualify for any tax reliefs.
The employee enjoys tax reliefs by having the contribution amount deducted from their basic salary before it gets taxed.
In general, Tier 2 investment cannot be accessed before retirement. The Tier 3 investment on the other hand must remain in the scheme for at least 10 years (for formal sector workers) or 5 years (for informal sector workers) if the employee wants to keep the associated tax benefits.
Important: The Act however allows funds in Tier 2 & 3 schemes to be utilised as down-payment for a mortgage on the employee’s primary home without paying any taxes — making Tiers 2 & 3 the best way to save towards home ownership.
Important Notice ::When an employee Registers for a Tier 3 Fund contribution,his or her Basic Salary will not be taxed until the tier 3 is deducted and this means that the person will have a lower tax deduction rate while having higher returns as compared to those without tier 3 deductions.
This means that the higher your Basic Salary ,the higher your tax rate, and vice versa. So if there is a further deduction on the basic salary before taxation, it will reduce the tax rate while that money is kept for the Contributor.
It is for these reasons that the Tier 3 becomes necessary, meanwhile, workers should be careful Of the Fund Managers that they will use.
Source:EducationGhana.net
