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Tuesday, July 23, 2024

Audit reveals SSHFC overspent pensioners’ money on admin, staff cost

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By Tabora Bojang

A performance audit report by the National Audit Office (NAO) on the management of social security funds has found that Social Security and Housing Finance Corporation (SSHFC) is excessively spending money from workers’ contribution on administrative and staff costs beyond the threshold recommended by the World Bank.

The corporation operates the Federated Pension Scheme which provides lifetime regular pensions for its qualifying members and also the National Provident Fund that provides members with a cash lump sum when they retire or go out of gainful employment before reaching the statutory retirement age.

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According to the audit report contained in the National Assembly Public Enterprises Committee report presented in the parliament last Monday, the administrative expenses of the National Provident Fund from 2018 to 2021 rose above the 10 percent benchmark recommended for social security firms in sub-Saharan Africa.

“According to the Pension Valuation Report for the Federated Pension Report by the World Bank, social security funds in sub-Saharan Africa like SSHFC, were not expected to spend more than 10% of their contribution on administrative expenses. The auditors benchmarked against the Social Security and National Insurance Trust of Ghana which has declined the percentage of contribution revenue on administration and operational expenses for the period 2017-20 from 16% to 10%. After review, the financial statements for the period 2018-21 showed that SSHFC has spent between 13- 23% of its contribution on administrative and staff cost,” the auditors revealed.

Increases for pensioners

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The auditors found that SSHFC has not increased pensions as in line with the estimated rise in earnings made by the actuary. They maintained that the increase in pensions shall not be more than the latest estimated rise in earnings made by the actuary.

“The pension increase rate ranges from 2.7% to 33% for the 2018 increase and 5% to 65% for the 2022 increase depending on the level of monthly pensions. According to the auditors, the 2019 and 2022 pension increase rates were determined by the management of the SSHFC and approved by the board. The maximum dalasi increase was said to be based on the amount affordable and sustainable by SSHFC. However, SSHFC already had a system called guaranteed minimum pension that was aimed at protecting pensioners from pension earnings that cannot sustain their livelihood. Guaranteed minimum pension assured that no pensioner earns below a certain monthly pension determined by management. This guaranteed minimum pension is adjusted when pensions are reviewed. The minimum pension from January 2018 to December 2021 was D1,210.30 and was revised to D2,000.02 effective January 2022,” the report further revealed.

Ineffective interest payments to members

The auditors stated that for the period 2018-2020, Social Security has only paid interest to members in 2020.

“The interest paid to members in the year 2020 was D84.8 million. This represents 2.09% interest rate to members on their accounts. The Corporation has not paid interest to members for the years 2018 and 2019. From the year 2013 to 2015, SSHFC has paid interest rates in the range 0.19% – 0.5%. From 2016 to 2019, SSHFC has not paid interest to members on their account. The fall in the level of interest paid to members is attributed to the performance of the investment portfolios of the corporation,” the auditors queried.

According to the auditors, the Investment Committees were last active in 2018. This was because of a change in the corporation’s leadership which resulted in investment decisions being taken by the board based on the MD’s recommendation and the Investment Department.

According to the committee report, SSHFC board chairman emphasised during the exercise that the corporation was hugely affected by the impact of the executive directives under the former regime amounting to over D2 billion in principal, recovery of which is still a challenge.

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