Question Tag: National Pension Act

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  • 5 Marks

PT – May 2021 – L2 – Q2d – Tax Administration

Explain the 3-Tier Pension Scheme under the National Pension Act.

Explain the 3-Tier scheme under the National Pension Act.

  1. First Tier: Basic National Social Security Scheme, mandatory for all workers in Ghana. Contributions of 13.5% (5.5% employee, 8% employer) are managed by SSNIT.
  2. Second Tier: Defined contributory Occupational Pension Scheme, also mandatory with 5% contributions managed by private trustees.
  3. Third Tier: A voluntary scheme for provident funds and other pension schemes. Contributions by employer and employee are tax-exempt up to 16.5% when contributed to approved fund managers.
  • 5 Marks

PT – Dec 2023 – L2 – Q2c – Income Tax Liabilities

Compute pension benefit and monthly pension pay based on provided salary and pension contributions.

Mr. John Romeski worked for Aligidon Company Ltd for 25 years and retired at the age of 60. In the last 3 years of his working life, he earned annual salary as follows:

Year Annual Salary (GH¢)
58th 93,000
59th 96,000
60th 99,000

He has 300 months’ contribution to his credit.

Required:

Assuming he retired under the National Pension Act, 2008 (Act 766), compute his pension benefit and his monthly pension pay. (5 marks)

Pension = Three years average salary x pension right x early retirement reduction factor.

Three years average salary = (93,000 + 96,000 + 99,000) ÷ 3 = GH¢96,000.

Pension right:

  • Minimum right: 37.5%
  • Additional percentage: (300 months – 180 months) x 0.09375 = 11.25%
  • Total pension right: 48.75%

Early retirement reduction factor: Mr. Romeski retired at age 60, so there is no reduction factor.

Pension = 48.75% x GH¢96,000 = GH¢46,800.

Monthly pension pay = GH¢46,800 ÷ 12 = GH¢3,900.

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