GH¢2.9 billion tier-two pension funds stuck with BoG

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Pension contributions into the temporary pensions fund account (TPFA) at the Bank of Ghana (BoG) have risen from GH¢756.9 million in 2012 to GH¢2.9 billion as of June 16, this year, data from the National Pensions Regulatory Authority (NPRA) has shown.

The amount comprises contributions from employers and their employees under the tier-two pension scheme as well as interests accrued from previous investments.

A senior executive at the authority told the GRAPHIC BUSINESS in confidence that the continuous payment of pension contributions into the TPFA followed the inability of many employers to register with certified trustees, which would have given the NPRA the green light to transfer their respective contributions to the trustees for onward investment and management.

Implications of delay

Although the funds are safe at the TPFA, their continuous hold up at the BoG limits the amount of pension funds in capital market, which is needed to help improve liquidity and ease the challenges associated with access to funds.

Mr Emmanuel Alex Asiedu, the Managing Director, STANLIB Ghana Limited, one of the fund managers, told the Graphic Business on June 21 that the continuous payment of pension funds into the TPFA, where they were mostly invested in treasury bills, deprived the capital market of the needed cash to grow.

“To be honest, we would have wanted all the funds to be released but looking at it now, I would want to see it from the point of the glass being half full than half empty. I think the regulator has done its bit by encouraging companies to get schemes but since that has not happened, the authority obviously cannot transfer the funds,” he explained.

“If the money comes, majority of it will be invested in government bonds and that will create captive debt for the government. The effect is that liquidity would improve and the entire financial sector will benefit,” Mr Asiedu said.

Reasons for hold up

The source at the NPRA told the Graphic Business on June 21 that the authority was unimpressed with the continuous hold up of funds at the TPFA.

The account, which was opened in 2010 as a temporary haven for tier-two contributions, has so far become a solution to the delayed registration of schemes by employers.

To help remove that hurdle and fastback, the growth of the pensions industry, the authority, earlier this year, undertook a compulsory enrollment of unregistered employers onto the various schemes.

The source explained that under the compulsory enrollment exercise, unregistered employers were distributed among the trustees after which the trustees were asked to follow up with the respective employers to finalise the registration process.

“Some of them have done the follow ups but they have not concluded discussions. Other trustees are yet to do that. Because of that the unregistered employers still continue to pay contributions into the TPFA and that is how come we have money still accumulating in that account,” the source explained.

“We did the compulsory enrollment to help offload the TPFA quickly, but it appears it will continue to receive contributions until the last employer joins a trustee,” it added.

Funds disbursed so far

The data further showed that as of May, this year, about GH¢2.9 billion of the contributions had been disbursed to registered trustees and fund managers.

The disbursement went to 51 schemes, 12 market trustees and 39 employer schemes, according to the data, which was made available to the Graphic Business in Accra.

The amount distributed represented the contributions of 135,511 employees from 3,015 employers.

This brings total pension contributions under the tier two to GH¢5.8 billion after it took off in 2010.

Implications on growth

So far, the MD of StanLib said, the release of the GH¢2.9 billion had boosted liquidity in the financial market and that would go a long way to help improve business operations.

He, however, explained that businesses needed to properly position themselves to be able to benefit from the funds.

Currently, regulations on the investment of the pension funds restrict trustees from investing the funds on riskier instruments.

Majority of the funds are to be invested in government and corporate bonds, according to the regulations, which are administered by the NPRA.

As a result, Mr Asiedu said companies interested in benefiting from the pension funds needed to issue bonds, which would give trustees the opportunity to invest in their operations.

“I think some of the companies have started doing this, but we will need many more to also join and issue,” he said.

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