Very good ideas and reforms have been murked-up as a result of poor transitional arrangements. Transition simply means a changeover, in everyday language. It is the conversion from one way of flow of event(s) into another of same with similar or different results. As we progress as a people, systems and processes in different facets of our lives have evolved. The successes of some of these evolutions have depended on the use of information from the previous systems/processes – from which a departure is being made – while others have not.
Top of the list of characteristics that a transition plan should have is a transition team. A team that is capable of implementing, smoothly, the tabled transition plan. This team, depending on the subject matter, should be made up of people with the requisite expertise; people who understand the ramifications of their actions and inactions at any point in time. Furthermore, such a team should have individuals who have the relevant industry experience, having practiced or studied it, in one capacity or the other.
Over and above everything, a transition should have a plan. A transition plan outlines events and timelines for those events, up to and, including full rollout of the new system/process. A transition without plan has no benchmarks for measuring the progress of the transition. Worse, an unplanned transition is likely to be stagnant as there are no timelines to be met except the general knowledge that there is some journey from one point to another. The people tasked to manage a transition may repeat roles and overlap in some areas while other areas suffer neglect, when there are no clearly designed transition plans.
A good transition should clearly define the transition plan and task a team with clearly spelt out terms of reference. Various scenarios, including worst cases should be examined and answers found.
Now back to pensions in Ghana. After President Kuffour signed into law, the National Pension Reform Bill, a board of trustees was constituted by President Mills to direct the affairs of the newly formed pensions regulatory body, the National Pensions Regulatory Authority (NPRA). Among other things, the Authority’s terms of reference are to supervise and regulate players in the pensions industry. To carry out its functions well, the Authority is empowered to have a secretariat with a lawfully mandated Chief Executive Officer whose duty it is to run the day-to-day activities of the regulatory body. For good reasons, or not so good reasons, the Authority was tasked with running the transition from the old SSNIT-run pension regime to the new trust-based three-tiered pension system.
One very critical matter that should not escape any pension reform’s transition team is what happens to workers who go on retirement whilst the transition is still on-going. At the backdrop of a situation where Social Security and National Insurance Trust (SSNIT) contributions have been reduced from 17.5% to 13.5% of workers’ gross salaries, the crucial question is – assuming the transitional period is four (4) years – what happens to workers who have made 17.5% contributions to SSNIT throughout their working lives, but have made 13.5% contributions to SSNIT in the last two and a half (2½) years toward tier-1 (managed by SSNIT) and 5 % to NPRA toward tier-2 (currently being managed by Bank of Ghana – on behalf of NPRA – as part of the transitional arrangements) schemes for the same period but are due for retirement now – even as the transition on ongoing? Would SSNIT be paying their accrued benefits under Defined Benefits arrangements based on 13.5% or 17.5% for the period mentioned? In the event that it is the former rather than the latter rate, whose responsibility is it to pay the four percentage difference? Should such retirees expect lump sum benefits from the Pensions Authority vis-à-vis the 5% tier-2 contributions made since January 2010 to date? Is there even an agreement between the Tax Authority and the Pensions Regulator on the applicable taxes upon exit from tier-3 schemes before the expiration of the full 10 year holding period for voluntary tier-3 schemes? Is there literature or even officers with ready and standardized answers to all these questions?
Considering that the Pensions Authority receives somewhat huge application fees from individuals and corporations applying to be trustees and even get a percentage of the Net Asset Value (NAV) of registered Funds as regulators’ fee, it is fair to ask if the National Pensions Regulatory Authority is itself well positioned to properly regulate schemes. Does it have the needed staff with the requisites skills? Is the Authority housed in an address befitting of a Pensions Regulator? Does it have a well empowered management team tasked to run the Authority under a proper organizational structure, report to the governing board and seek the board’s directions only on matters that the law defers to the board? Is the Pensions Regulator ready to regulate an old and powerful semi-autonomous body like SSNIT (which is part of the Authority’s mandate)?
We are well over a full year behind the initial timetable set by the transitional team for the full rollout of the new pensions system. True, it appears to be getting to the full implementation stage. But it has appeared so for over a year now. And even if it is true that we are almost there – and I believe that to be the case – what has been the cost so far to contributors and industry players?
These are legitimate questions to be asked of our pension reform’s transition team. It is not difficult at all for all of us to murk-up this one. Pensions have built economies, as I wrote in the January & February 2012 edition of this publication. We, as a nation, should not lose sight of the potential benefits that a properly rolled out pensions regime under the trust-based three-tiered pension system will have on us as individuals, families, corporations and as a nation.