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FINANCIAL GOVERNANCE AND RISK MANAGEMENT OF SOCIAL SECURITY. OUTLINE OF A PRESENTATION BY MR KWASI OSEI, DIRECTOR GENERAL, SOCIAL SECURITY AND NATIONAL INSURANCE TRUST (SSNIT). 1.0 The Ghanaian Experience
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The Social Security and National Insurance Trust, SSNIT, the administrators of Ghana’s national pension scheme has a 14 Member Board of Directors representing government, employers and workers constituted as follows:
1.2 Members bring to the board varied
professional training and experience
- Additionally, the Trust engages external actuaries every three years. Some have come from the US Social Security Administration, the UK Government Actuary Department and the International Labour Organisation.
2.1 Internal Valuation done annually whiles External Valuation done every three years.
2.2 Actuarial Review focuses on the scheme’s long-term financial viability – the review covers a 50- year period.
2.3 There is no interference in both internal and external reviews.
reports made available to the
2.5 The reviews are normally
discussed with in-house actuarial
staff and other Management staff
some of whom are consulted or
provide input in the review
2.7 The review reports draw Management’s attention to areas to focus on i.e. administrative expenditure, and investment returns; demographic changes.
3.2 Consult External Investment Advisors.
3.3 Appropriate feasibilities are carried before
major investment decisions are taken.
3.4 The Trust has developed investment
policy guidelines that incorporates
comprehensive asset allocation
guidelines/investment portfolio mix.
4.1 Strict Compliance systems, including prosecution of defaulting employers.
4.2 Contributions are credited to individual accounts, current performance rate is about 80%.
4.3 Members’ Account Unit established in branches to ensure accurate crediting of contributions.
4.4 Programme to issue periodic statement of accounts to all members to take off soon.
4.5 Assets are registered and their movements monitored
5.1 Scheme is solvent, current fund ratio is
5.2 Has enough cash to pay benefits
5.3 Treasury assets (securities) can all be
6.1 Scheme is still young. Membership
not growing as fast to offset the
6.2 High expenses levels which have
to be managed
- expensive field operations
- inadequate automation
contributions for health insurance
reduces reserves available to the
6.4. Being a partially funded scheme, it
has an unfunded liability. The
unfunded liability as of December
2003 was ¢7.2 trillion. ($800m)
7.1 Low growth in the formal sector
employment and effect on membership
7.2 Large number of contributors stopped
contributing due to down-sizing of
enterprises. Effect is inability to
accumulate enough years to qualify for
Low salaries, under reporting of income;
High benefit expectations, unrealistic
minimum benefit guarantees.
7.4 Inflation and interest rates have been
declining over past three years and hope
that such manageable levels as single
digits can be established and maintained.
8.1 Failure to deliver expected returns
8.3 Inadequate diversification
8.4 Mismatch of assets/liabilities
9.1 Structural Changes
Addition of new benefits without
commensurate increase in contribution rate.
9.2 Over generous promises
Pressure to provide unrealistic benefits not
related to contribution bases.
9.3 Political interference
In investment decision-making