The Social Security and National Insurance Trust (SSNIT) has announced in a 11% increase in the monthly benefit of pensioners. This was contained in a press release earlier on in the year. SSNIT increased the benefit in consultation with the National Pensions Regulatory Authority (NPRA) and in accordance with Section 80 of the National Pensions Act 2008 (Act 766).
The 2020 indexation rate was determined using the percentage change in the annual average Consumer Price Index (CPI) for 2019, forecast of the 2020 National Annual Price Inflation, ability of the Fund to pay and the long-term sustainability of the Scheme among others.
Indexation vrs Inflation
The same rate was applied for 2019, however the 2020 indexation of 11% is higher than the forecasted inflation rate of 8%. This give pensioners a real increase of 3% on their benefits. The overall indexation amount was redistributed at a Fixed Rate of 6.6% and a Flat Amount of GH¢ 37.38 for all Pensioners on the SSNIT Pension Payroll as at 31st December, 2019 (SSNIT Website). SSNIT increases pension to cater for inflationary pressures in the benefit.
With this redistribution, lowest earning pensioners currently earning GHS300.00 will have their pensions increased to GH¢357.18 (an increase of 19.06%). Redistribution is a mechanism applied to the indexation rate to cushion members on low pensions in line with the solidarity principle of social security.
New pensioners retiring from 1st January 2020 under the SSNIT Tier one arrangements will however receive GH¢300 as minimum pension. The issue of minimum pension comes as a boost to those who by virtue of low salaries paid low contributions and thus earn less than the GH¢300. This is in a accordance to the means testing method of paying social benefits.
Per the current adjustments 70% of pensioners will receive 11% or more as effective increase in their pensions. 98% of pensioners will receive an effective increase equal to or above the targeted inflation rate for 2020.
The new indexation rate will increase SSNIT’s liability for 2020 by GH¢ 243 million.