- 5 Marks
Question
What are the contribution rates and how are they distributed between the Employer and Employee, under the 3-Tier Scheme? (5 marks)
Answer
Tier 1 and 2 – Mandatory pension schemes:
- Worker contributes 5.5% of their basic salary.
- Employer contributes 13% of the worker’s basic salary.
- Total contribution: 18.5% of the worker’s basic salary.
- Out of the 18.5%, 13.5% is remitted by the employer to SSNIT within 14 days after the end of the month, and 2.5% of this amount goes to the NHIA for the worker’s health insurance.
- The remaining 5% is sent to the mandatory Second-Tier Occupational Scheme, which is privately managed by trustees approved by NPRA.
Tier 3 – Voluntary pension scheme:
- The amount to be contributed by the employee and/or employer is not fixed.
- However, the total contributions made by the employee and employer should not exceed 16.5% of the employee’s basic salary for tax relief purposes
- Tags: 3-Tier System, Employee Contributions, Employer Contributions, Pension Scheme
- Level: Level 2
- Topic: Tax Administration
- Series: AUG 2022
- Uploader: Theophilus