The National Pension Regulatory Authority (NPRA) is set to rollout new investor-friendly guidelines by April, as it seeks to encourage long-term investments.
Under the new rules, effective April, fund managers can invest up to 60 percent on government of Ghana securities; 35 percent maximum for corporate debt equities; and 20 percent maximum for equities.
Other provisions include 35 percent maximum on bank securities and other money market securities; 15 percent on collective investment schemes; as well as a limit of 15 percent on alternative investments.
The new investment guidelines seeks to ensure safety of assets and fair results on the funds.
David Tetteh-Amey Abbey, Deputy Chief Executive Officer of the NPRA said: “We want to attract capital market products like equity and other long-term investments. So we believe that with this amount of liquidity with fund managers, companies should be able to list on the equity market.
We also realised that government has started issuing some long-term bonds and these are good sources for pension funds. As a regulator, we want to ensure that pensioners go on retirement comfortably and then scheme assets are also secured, so that when they are going on retirement you won’t tell them that the market has crashed or is not doing well.”
The decision by the NPRA to come out with the new guidelines come on the back of calls by experts to allow private pension funds to be used for sound long-term investments.
The NPRA has subsequently met stakeholders—custodians, fund managers, and trustee—to discuss the new guidelines.
“We have taken our stakeholders through the guidelines. We met with corporate trustees, fund managers and custodians, and we have taken them through the guidelines.
These guidelines seek to govern how funds are supposed to be invested. So as a regulator, we are just giving them policy direction as to the asset classes and the maximum allocation that they should put in a particular asset class.
For example, we are saying that total fund asset maximum in government securities have now reduced from 75 to 60. And we are saying that within that same asset class of government securities, you have to put about 35 percent in long-term investment --- that’s government securities above two years,” he noted.
The current three-tier pension system, enacted into law in 2008, demands employers to register their staff under a first-tier basic pension scheme managed by SSNIT and a second-tier work-based scheme that is privately managed and is expected to give contributors higher lump sum benefits than presently available under the SSNIT or Cap 30 pension schemes. The third-tier is voluntary and includes provident funds and personal pension schemes.
The reforms, which ended the monopoly of SNNIT, were hailed as a major step toward improving the retirement conditions of workers through competition that will maximise the returns earned on pension investments.
It is projected that the reforms will grow the assets of the pension industry from GH¢1.06billion to GH¢5.5billion over the next two years.
The new pension law, the National Pensions Act 2008 (Act 766), requires an additional contribution rate of 1percent to be shared equally between the employer and employee. The employer pays 13percent (instead of the current 12.5percent) and the worker now pays 5.5percent (instead of the current 5percent) making a total contribution of 18.5percent (instead of the current 17.5 percent).
Currently, the NPRA approve, regulate and monitor Trustees, Pension Fund Managers, Custodians and other institutions relating to pension matters. It also advises government on the overall policy on pension matters in Ghana.