Public Expenditure

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PUBLIC EXPENDITURE

What is public expenditure? Public Expenditure refers to

Government Expenditure.

It comprise all expenditures incurred by the central government, the local government and other public sector entities for the delivery of public services or for a public course.

The expenditure incurred by public authorities like central, state and local governments to satisfy the collective social wants of the people is known as public expenditure.

It consist of all legitimate spending from the public funds.

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Why Public expenditure?

Government spends for the various reasons: To run government machinery on

day to day basis (i.e administration cost)

To provide public protection and security

To compensate public service staff

To provide infrastructure for development

To service debt obligations

To make equity investment

To stimulate national growth and employment.


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Classification of public expenditure

Public expenditure may be classified in various ways based on their nature, purpose , and function. These include: Statutory and Discretional

expenditures

Capital and revenue expenditure

Productive and Non productive expenditure

Transfer and non-transfer expenditure

Planned and Unplanned expenditure

Functional expenditures


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Classification of Public Expenditure (control)

Statutory and Discretionary expenditure Statutory expenditure refers to

expenditures that are charged on the public funds by the Constitution and other enactments.

These expenditures are regarded as statutory obligations and therefore do not require prior approval of Parliament

for example, debt servicing, pension payments (CAP 30 scheme) salaries of certain public officers such as

the Auditor General and Judges of the Court of Appeal.

Transfers to statutory funds such as District Assembly Common Fund, GETFund

Nugatory payments (e.g judgment debt)


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Statutory and Discretional Expenditures Discretional expenditures

They are also known as non-statutory expenditure.

They are those that Parliament approves annually through an Appropriation Act.

Once approved the vote wording and the expenditure authority attributable to each vote become the governing conditions under which these expenditures may be made.

The government in power thus has control over the decision to incur such expenditures.

This spending is optional as part of fiscal policy.


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2. Revenue Expenditure and Capital expenditure

Revenue expenditure

REs are also known as recurrent expenditures.

REs are current or consumption expenditures incurred on civil administration, defense forces, public health and education, maintenance of government machinery.

This type of expenditure is of recurring type which is incurred year after year.

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Revenue Expenditure and Capital expenditure (cont)

Capital Expenditures

capital expenditures are incurred on building durable assets, like highways, multipurpose dams, irrigation projects, buying machinery and equipment.

They are non recurring type of expenditures in the form of capital investments.

Such expenditures are expected to improve the productive capacity of the economy.


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3.Productive and Non- Productive Expenditure

Classical economists classify expenditures based on their productive capacity.

Productive/development expenditures They expenditures on infrastructure

development, public enterprises or development of agriculture to increase productive capacity in the economy and bring income to the government.

Non-productive /non-development expenditures Expenditures in the nature of

consumption such as defense, interest payments, expenditure on law and order, public administration,

These expenditures do not create any productive asset which can bring income or returns to the government.

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4. Transfer and Non transfer Expenditures-A.C Pigou

Transfer expenditures Transfer expenditure relates to the

expenditure against which there is no corresponding return.

Such expenditure includes public expenditure on :- National Old Age Pension Schemes,

Interest payments,

Subsidies,

Unemployment allowances,

Welfare benefits to weaker sections, e.g. livelihood empower payment

Such expenditure basically results in redistribution of money incomes within the society.


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Transfer and Non transfer Expenditures (cont)

Non transfer Expenditure The non-transfer expenditure

relates to expenditure which results in creation of income or output.

The non-transfer expenditure includes development as well as non-development expenditure that results in creation of output directly or indirectly.

Examples include; Economic infrastructure such as

power, transport, irrigation, etc.

Social infrastructure such as education, health and family welfare.

Internal law and order and defense.

Public administration, etc.


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5. Planned and Unplanned Expenditures Planned expenditures

Expenditures that are incurred in according to the legally adopted budget.

These expenditures are predetermined by the executive and .approved by parliament.

Unplanned Expenditures They are contingent expenditures,

which are not anticipated by government.

Examples include: Disaster relief cost

Social disorder management

Unanticipated rise in the cost of fuel.


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6. Functional expenditure

Some economists classify public expenditure on the basis of functions for which they are incurred.

This kind of classification provides a clear idea about how the public funds are spent

These includes: Defense expenditure,

Social services ,

economic services,

General service

infrastructure and industrial development.


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Reasons for Growing Public Expenditure

Several reasons account for the increasing public expenditure over the years and they include: Growing Population leading to higher

demand for public services

Increasing cost of defense and general security to due complexities of the time

Increasing interest payment as result of huge government borrowing

Increasing subsidies of public goods and services

Increasing cost of public administration

Quest for urbanization

Cost of democratic governance

High inflation

Social protection and security measures


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Principles of public expenditures

To ripe the benefits of public expenditures the following six (6) principles must be applied: Public Expenditure must be productive

and used for developmental purposes. A proper authority should give the

approval of public expenditure. Auditing of public expenditure should be

done to ensure that money is spent for the purpose for which it is sanctioned.

Public Expenditure should be incurred on essential items of common benefit.

Public expenditure should promote flexibility and changes in spending policy of the state.

There should be flexibility and changes in spending policy of the state.


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Chart of Accounts Public Expenditure of Ghana

A chart of accounts (COA) is a created list of the accounts used by an organization to define each class of items for which money or the equivalent is spent or received.

It is used to organize the finances of the entity and to segregate expenditures, revenue, assets and liabilities in order to give interested parties a better understanding of the financial health of the entity.

Government of Ghana expenditure classification per the chart of accounts is dynamic. We have: MTEF classification ( 1999-2011) GIFMIS classification ( 2012 to date)


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MTEF Classification of Expenditure

Under the Medium Term Expenditure Framework (METF) discretional expenditure is classified into four (4) as follows:

Personal emolument

Administration cost

Service cost

Investment cost

Statutory:

Interest expense*

Transfers

Other expenditures

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Personal emolument It refers to compensation to

employees of government.

It includes:

Wages and salaries

Allowances

Probation

Casual labour

Honorarium

Contract appointment

Transfer to households (13% SSNIT)

etc


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Administration cost

Refers to the cost f running government establishment to provide public services.

Such cost include: Office consumable

General cleaning

Printing and publications

Rent

Repairs and maintenance

Car maintenance allowance

Utilities and communication

Refreshment

Travel and transport etc


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Service cost

This are cost incurred in providing general public services and/or improving the capacity of entities to delivery more efficient service.

They include:

Conferences and workshop

Training seminars

Foreign travels cost and per diem

Printing and publications

National day celebrations

National awards etc

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Investment cost

It relates to expenditures on the construction or acquisition of capital assets.

They include:

Purchase of motor vehicles etc

Construction of roads, bridges etc

Renovation of premises

Purchase of computer , accessories and software

etc


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GIFMIS Classification This is the current system of

expenditure classification in Ghana

Expenditures are put into eight categories as follows:

Compensation for expenditure

Goods and services

Consumption of fixed capital

Public interest

Subsidies

Grants

Social benefits

Other expenditures

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1. Compensation for employees

These is same as personal emolument except all allowances payable to employees are classified as compensation.

For example car maintenance allowance


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2. Goods and services

It combines the administration cost and service cost

3. Consumption of Fixed capital

It measure the portion of non-financial assets consumed within an accounting period

It includes

Depreciation on motor vehicle

Depreciation on plant and equipment

Depreciation on furniture and fittings

etc


4. Public interest

It comprise interest on domestic debts and external debt

5. Subsidies

It refers to all subsidies to both private sector and public sector.

For example subsidies of utilities, fuel etc

6. Grants

Government outlays to other countries or the local government.

Example id District assembly common fund


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Social benefits

expenditures on social securities such national health insurance, old age exemptions, school feeding etc

Other Expenditures

This may include contingent expenditures and other expenditures which do not fall under any of the 7 groups.


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PAYMENT PROCESS

Levels of payment responsibility

Appropriations Expenditure

Consolidated

Department special

bank account

Items, contracts

etc

MOF/CAG HOD


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Payment from Consolidated fund

No payment shall be made out of the consolidated fund except as provided by article 178 of the Constitution.

A payment out of the consolidated fund shall not be made in excess of the amount granted under appropriation for any service.

All payment out of the consolidated must be approved by the MOF through a warrant.


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Payment from Consolidated Fund (cont)

Payment is made out of the Consolidated fund when: The expenditure is charged on the

fund by the Constitution or any other enactment (statutory payments)

The expenditure is authorized by an Appropriation Act .

The expenditure is authorized by supplementary estimate approved by a resolution of parliament.

The expenditure is authorized by a provisional appropriation/vote passed by parliament

The expenditure in regard to trust monies is in accordance with the regulations governing that trust monies.


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Process of making payment out of the Consolidated

Fund Every withdrawal of moneys

appropriated from the consolidated fund shall be backed by a warrant signed by the MOF.

Special bank accounts are opened for each department under the authority of CAG

Unless otherwise provided, the special bank account will be opened with BOG

Departmental allocations /appropriations are lodged into these special accounts.


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Payment of Appropriation from Consolidated fund

No payment can be made against an appropriation except on the requisition of the head of department (deputy authorized) for which the appropriation belongs.

The requisition shall be in the form and with the relevant documents and certificates as CAG may require.

CAG has the authority to reject requisition made by HOD.

However, the HOD may report the circumstances to the MOF who may confirm or reserve the order.


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Why would CAG reject requisition for payment from consolidated fund?

CAG may reject requisition if is of the opinion that payment on it:

Would not be lawful charge against the consolidated fund

Would result in expenditure in excess of the appropriation

Would reduce the balance available in the appropriation in such a manner that it would not be sufficient to meet the commitments to be charged against it.


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Warrants A warrant is a document signed

by the MOF approving the payment of moneys allocated by parliament from the consolidated fund.

Benefits of warrants:

Provides authority for disbursement

Services as evidence for approval of payment in times of disagreement

It ensures the integrity of the consolidated fund

It helps to control and plan disbursement from the fund


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Types of Warrants Provision warrant which gives

approval for making payments out of the consolidated fund prior to the passage of the Appropriation Act. It elapses after three months after the beginning of the year or when an Appropriation Act is Passed

General warrant which gives approval for making payment for recurrent expenditures (item 1 and 2) of the Appropriation Act.

Specific warrant provides approval for the payment of capital expenditures on case by case basis.

Revote warrant is issued to approve the due discharge of undischarged commitments out of the unexpended balances of the previous years appropriation available.

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Adjustment warrant is issued to give approval for the payment of increases in certain expenditures beyond what is provided in the budget. (e.g. wages increases).

Establishment warrant gives approval for employment /promotions in the public sector

Transfer warrants give approval for disbursing funds from the consolidated to other funds (e.g transfer to DACF, GETFund, NHIS)


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Payment Procedure out of the CF in times of Emergency. In times of emergency the following

procedures are followed: Head of affected department makes

application to the sector minister concerned

Sector Minister upon receipt of the application minutes on it ant forward it to the MOF

MOF approves necessary actions on the application

Decision of MOF is then communicated to the HOD through the sector Minister and the CAG

CAG takes appropriate action per the decision of the MOF

MOF within three days of making the decision cause copy of the application ,the comments and decision to be delivered to parliament.


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Process of Making Payment from Appropriation

Every payment out of the special banks relating to the appropriation must be made under the direction and control of the head of the department

Every head of department must ensure that a record is kept of cheques or other instruments issued.


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Payment for goods, services and works

Payment must not be made for goods , services or works unless HOD certifies that: the goods have been supplied,

services have been rendered or works have been performed.

price charge is accordance to the contract or reasonable

payment is in accordance with the contract where payment is to be made before work done.

All relevant vouchers, certificates and other supporting document are supplied (LPO, PVs, Contracts, etc)

All tax withholdings are appropriately made

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Payment for Contracts Minister of finance must approve

payment for all contracts Minister approves such payments by

signing a certicate for payment when sufficient unencumbered balance available out of any appropriation during the financial year in which the contract is entered into

In case of forward commitments, the MOF issues certificate that states that if and when the government grants an appropriation the commitments will be entered as an encumbrance against the appropriation


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Balance of Appropriation The balance of an appropriation

made for a financial year that remains un expended at the end of the year shall elapse and the subordinate authorities made under the appropriation shall elapse with lit.

HOD are required to submit to the MOF statement of the commitments entered into but undischarged before the end of the financial year in which they were incurred.

MOF may grant a Revote warrant if he satisfies himself .

Amount in the revote warrant must be included in the first supplementary estimate of the new financial year to be laid before parliament.

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Control of Public Expenditure

The objective is to ensure that public expenditure produces value for money .

Expenditure control measures covers authority, approval, payment and accounting for the expenditure.


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Expenditure control measure General controls include;

Ensure that the expenditure is lawful charge against appropriation

Ensure that appropriate approval is sought from the MOF (warrant) or the Head of Department.

Ensure that goods, services and works are performed before payment

Ensure that the prices or rates are in accordance with the contract or are reasonable

Ensure that appropriate supporting documents are provided and verified


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General expenditure control measure (cont)

Ensure that large payment are done by cheques or direct transfers.

Ensure safe custody of all value books (,Cheques LPOs, PVs, Travel warrants etc) to avoid abuse

Ensure that records are maintained for all cheques and PVs issued for cross references

Ensure that cash books are updated regularly

Ensure segregation of duties in the processing ,payment and accounting of expenditure.


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Expenditure Loss

Expenditure loss occurred when the government is deprived of the benefits associated with public spending

Expenditure loss may arise from:

Irrecoverable overpayments

Nugatory payments

Improper payments

Excess expenditures

Fraudulent payments


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Irrecoverable overpayments

It occurs when an excess payment has been made by error and recovery cannot be effected because the recipient cannot be traced or is incapable of making payment.

Nugatory payments

It occurs when government is legally obliged to make payment of penalty for which no corresponding receipt of goods or services has been derived. Example is judgment debts.

Ex-gratia payment does not constitute expenditure loss


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Improper payments

It occurs when the transaction is contrary to the law but does not constitute any criminal offence. Example are gross waste or extravagance.

Excess Expenditure

Its a variation of improper payments where payments have been made in excess of approved estimates without the prior authority of parliament.

Fraudulent payments

It arises from transactions which involve use of falsified documents or certificates to steal money or other property of state.

It is a criminal offence under the Criminal code.


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Accounting for Salaries and Pensions

Personal emolument refers to wages, salaries and allowances paid to staff of government.

It is compensation for employees on government entities.

Personal emolument is a major government expenditure.

Pensions are entitlements of retirees of government. It includes pension allowance, gratuity and other benefits


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Accounting for Personal emolument

Responsibilities of HOD in relating to personal emolument include: Maintenance of records of all personal

emolument of staff in his department Ensuring that payments are made as

and when due Ensuring that no overpayments are

made and that no ghost names are paid

Ensuring that all required deductions are made correctly

Ensuring that authorized establishments are not exceeded

Ensuring that rates of pay authorized are not exceeded

Ensuring that salaries of staff who vacate post or transferred are stopped immediately.

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Accounting Authority for Payment of Personal

Emolument Authority for accounting for

personal emolument relates to:

Departmental pay and records section responsible for general control of personal emoluments within the department.

Local head of department responsible for notifying heads of departments of about their staff pay.

The Central Pay Processing Division of the CAG (IPPD Unit) responsible for mechanized payroll.

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Payroll Accounting Payroll is the sum of all financial

records of salaries for an employee, wages, bonuses and deductions.

In accounting, payroll refers to the amount paid to employees for services they provided during a certain period of time.

In a centralized payroll system, CAG is responsible for payroll processing and payments of salaries of all government workers based on the inputs from the respective departments.


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Payroll Data

A typical payroll contains the following data:

Personal data

Staff name and identification number;

Social security number

Bank information

Salary scale/position

Name and code of employer institution

Consolidate Salary

Basic salary

Allowances ( rent allowance, car maintenance allowance, etc)


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Payroll data (cont) Deductions from pay

No deduction shall be make from personal emoluments, except for statutory deductions, disciplinary deductions and voluntary deductions approved by HOD.

Statutory deductions include: Pay As You Earn (PAYE) 5.5% Social security contribution

Disciplinary deductions are those resulting from disciplinary action such as demotion, interdiction or surcharge.

Voluntary deductions are self imposed deductions such as: Membership dues Repayment of loans and advances welfare schemes Insurance etc


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Integrated Personnel and Payroll Database (IPPD)

In quest to mechanized the payroll, CAG has adopted the IPPD versions for processing salaries.

IPPD is an oracle software and it has been upgraded to IPPD2 and now IPPD3 to improve efficiency in salary processing.

IPPD


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Benefits/Objective of IPPD to maintain accurate and consistent

personnel data in the Public Service.

to brig about uniformity in the management of personnel records in the ministries/departments

to do away with salary delays, promote accurate data capture on staffing levels.

Create an efficient computer-based system for gathering, storing and processing information for management decision making.

To minimize wastage that used to be incurred through bulky printing of paper whenever a personnel related query was raised.

Make it possible to use data for purposes of expediting decision making.

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Challenges of IPPD

High acquisition and maintenance cost of the IPPD

It requires regular update of the system which may interrupt payroll processes.

Lost of data due to system failure, especially where there is poor backup system

IT expertise needed to run the system are unavailable in the sector

It can provide the opportunity for computer-fraud which can be deadly.


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Stoppage of Salary Payment A HOD must cause the immediate

stoppage of payment of salary to a public servant under the following circumstances:

When a public servant has been absent from duty without leave or reasonable cause for a stipulated period

When a public servant has been on leave without pay

When a public servant is convicted of offence involving theft/fraud or sentence for imprisonment.

When a public servant resigned, retires or die.


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Notification of the Stoppage The HOD must bring the notice of

the stoppage to the CAG and the banker of the public servant.

Notification action includes: Notification to CAG of the salaries are

paid by CAG directly into the public servants account

Notification to the bank for the repayment into the consolidated Fund of salary or other payments credited to the public servants bank account

Issue of the appropriate salary input to the section responsible for stopping payments on the payroll; and

Notification to internal auditor.

Failure to effect the stoppage within the time required is a breach of financial discipline.


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Stoppage of salaries (cont) CAG stops salary of a public

servant when he is of the opinion that:

There is an anomaly with a salary or any other payment due to the public officer;

CAG within 10 working days of the stoppage inform the head of depart ment about the stoppage


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ACCOUNTING FOR PENSIONS

A pension is a contract for a fixed sum to be paid regularly to a person, typically following retirement from service.

There are two types of pension plans: Defined Benefit Pension

Defined Contributory Pension

Types of main pension scheme in the pubic sector are: CAP 30 Pension scheme

Contributory Three Tier Pension scheme


Defined benefit pension is a type of pension plan in which an

employer promises a specified monthly benefit on retirement that is predetermined by a formula based on the employee's earnings history, tenure of service and age rather than depending directly on individual investment returns.

A defined benefit plan is 'defined' in the sense that the benefit formula is defined and known in advance.

CAP 30 Pension Scheme of government is a example.

Benefits under the first tier of the national pension scheme is another example.


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Defined Contribution Pension

It is a plan in which the formula for computing the employer's and employee's contributions is defined and known in advance, but the benefit to be paid out is not known in advance.

The benefits under the plan is dependent on the returns on the investment of the fund at the end of service.

Benefits under the occupational scheme (Tier 2) and the provident fund (Tier 3) under the three tier contributory pension scheme are good examples.


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CAP 30 Pension Scheme It is established under Chapter 30

of the 1950 British Colonial Ordinances (Pension Ordinance No. 42), popularly known as CAP 30.

The CAP 30 Pension scheme is a defined benefit scheme that is based on terminal salary and pension benefits payable are specified or defined in the rules of the Scheme.

From its inception, CAP 30 was a non contributory scheme. It became contributory to some beneficiaries from 1stJanuary 1972


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Benefits under CAP 30

Benefits include:

Gratuity and Pension;

Gratuity only;

Pension only;

Death Gratuity;

Contract Gratuity;

Commuted Pension; and

Annual allowance


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Qualification of CAP30

The criteria for qualification for CAP 30 benefits are that the beneficiary should:

have held a pensionable position as at December 31, 1971, (except those exempted by law);

have done a minimum of ten (10) years unblemished service;

have attained minimum age of 45 years; not have had a break in service, except with the approval

Have reach a compulsory retirement age of 60


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Challenges of CAP 30 CAP 30 was phased out due to

certain challenges, including:

Unsustainability of the scheme due to pressure on the consolidated fund

The slowness of processes and cumbersome nature of procedures

Discrimination among working population

poor record keeping, storage facilities and in security of vital information on pensioners

Lapse in the law and its amendments.


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Three -Tier Contributory Pension Scheme

The CAP is replaced by the National Pension Scheme known as Three Tier Pension Scheme.

This is established by the National Pension Act 2008 (Act 766).

Under the new pension arrangement, the National Pension Regulatory Authority was established.

NB: New pension does not apply to officers and men of the Ghana Armed Forces and any other person who is expressly exempted by law


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Functions of NPRA Functions include:

be responsible for ensuring compliance with this Act;

register occupational pension schemes, provident funds and personal pension schemes;

issue guidelines for the investment of pension funds;

approve, regulate and monitor trustees, pension fund managers,

custodians and other institutions that deal with pensions as the Authority may determine;

establish standards, rules and guidelines for the management of pension funds under this Act;

regulate the affairs and activities of approved trustees and ensure that the trustees administer the registered schemes;

regulate and monitor the implementation of the Basic National Social Security Scheme;


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Functions of NPRA (cont) carry-out research and ensure the

maintenance of a national data bank on pension matters;

sensitize the public on matters related to the various pension schemes;

receive and investigate complaints of impropriety in respect of the management of pension schemes;

promote and encourage the development of the pension scheme industry in the country;

receive, and investigate grievances from pensioners and provide for redress;

advise government on the general welfare of pensioners;

advise government on the overall policy on pensions in the country.


A contributory Three-Tier Pension Scheme

A contributory three-tier pension scheme consisting of

A mandatory basic national social security scheme;

A mandatory fully funded and privately managed occupational pension scheme, and

A voluntary fully funded and privately managed provident fund and personal pension scheme.


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Objective of the Three-Tier Pension Scheme

The object of the scheme is to

provide pension benefits to ensure retirement income security for workers,

ensure that every worker receives retirement and related benefits as and when due, and

establish a uniform set of rules, regulations and standards for the administration and payment of retirement and related benefits for workers in the public and the private sector.


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Contribution to Three-Tier Pension Scheme

Total of 18.5% of basic salary is contributed monthly as follows:

The employer will make a monthly contribution of thirteen per cent (13%) of basic salary

The worker will make a contribution of five and a half percent (5.5%).

out the total 18.5%:

13.5% (of which 2.5% given to NHIS) goes to first tier

5% goes to second tier.


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Management of the Three Tier Scheme.

The first tier of the scheme is managed by Social Security and National Insurance Trust

The second tier and the third tier are managed approved private fund manager .


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Quafication for Pension under the tier 1

A worker qualifies for the basic national insurance pension scheme when the person:

A registered contributor to the scheme

Attained voluntary retirement age (55) or compulsory retirement age (60)

Has contributed for not less 180 months or 15 years

Has been certified as invalid and contributed for at least 12 month in the last 36 months

Has died in active service.


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Benefits under the first tier

Member who qualifies enjoys the following:

Superannuation/old age pension: entitles a retiree who contributed to at least 180 months or 15 years to both monthly pension and gratuity

Invalidity: payable to a person who becomes invalid during the course of employment after contributing for at least 12 months

Lump sum: one-off amount payable to a person who retires but contributes for less than 180 months/15years.

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Survivors lump sum: Payable to the family of a deceased member who depends on the deceased or nominated by the deceased.

Commuted Pension: Payable to survivors who retires and dies before 75 years.

Hazardous employment benefits: payable to persons who attained the age of 55, contributed for 180 months and works in a hazardous work environment ( underground mind, steel works etc)

Other benefits: to be prescribe by MOF in consultation with NPRA.


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Actuarial Calculations Superannuation/old age

pension Superannuation/ old age pension

may be of two options: Full pension

Reduced pension

Full pension One qualifies for full pension if he is

at least 60 years and has made a minimum contribution of 180 months in aggregate.

Reduced pension You must be 55 and above but below

60 years of age and you must have made a minimum contribution of 180 months in aggregate


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Basic calculation of superannuation

The data required for the calculation:

Age

Average best three years salaries

Number of months you have contributed. Pension right earned which is based on the number of years contributed. 180 months give 50% and any one extra months contribution earns you 0.125%. For example when you contributed for 200 month your pension right earned is 50% + (0.125x20)=52.5%

NB pension right can not exceed 80%


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Calculation of full pension A lecturer contributes to basic

national security scheme from May 12th , 1977 and retires as a professor on 12th June 2014 at the age of 60. His last four years annual salaries were GHc72,000, GHc74,000, GHc78,000 and GHc82,000.

Compute his full pension

Solution;

Age =60 years, Average salary =70,000

Pension right = 50% + (0.125 x276)= 84% exceeding 80%

FP = Average salary x pension right

= GHc70,000 x 0.80 =GHc56,000


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Calculation of Reduced Pension It is computed as a percentage of

full pension.

Agreed percentages per AGE : 55 yrs.60%

56 yrs.67.5%

57 yrs.75%

58 yrs..82,5%

59 yrs.. 90%

Assumed the same date but in this case the professor retires at 57 years. Compute his pension.

Solution;

Reduced pension = 75% of FP

= 0.75 x 56,000

= GHc42,000


Gratuity/lump sum at old pension

Where a person qualify for a full/reduced pension, he could choose to collect 25% of your 12 years pension as a lump sum.

This will be paid to you at the present value based on prevailing T-Bill rate.

Gratuity/lump sum for old age

= 25% of FP/RP

Gratuity = 25% of 56,000 =GHc14,000

or

= 25% of 42,000 =GHc10,500


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Application Procedure for Superannuation

Inform the nearest SSNIT Branch Office at least three (3) clear months before your retirement.

The SSNIT Branch Office will then supply you with an Application Form for Payment of Pension for completion.

Complete the form and attach two of your recent passport-size photographs.

Let your employer endorse the form. Submit your completed form to the

SSNIT Branch Office as early as possible.

SSNIT will advise you to collect your monthly pension at a bank of your choice.

Members should fulfill their social security guaranteeship obligations before making their claim.


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Functions of SSNIT It was established to perform

these: operate the basic national social

security pension scheme and other schemes as may be prescribed by law;

have a Fund into which shall be paid the contributions and any other

moneys as may be required under this Act;

be responsible for the general administration of the social security scheme and regulations made under it;

ensure the provision of social protection for the working population for various contingencies including old age, invalidity and death;

be responsible for the administration and investment of funds within the


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Functions of SSNIT (cont)

framework of general directives issued by the Board of Trustees and approved by the Authority;

collaborate with other complementary social protection schemes in respect of specified operational and administrative functions to achieve efficiency, cost savings and avoidance of duplication of functions;

have general control of the funds and investments of the social security scheme and the management of the Trust; and

perform any other functions that are ancillary to the objects of the Trust.


2014

Documents

Public Expenditure