Perceived Benefits and Effectiveness of Tier 2 of the 3 Tier Pension Scheme Among Public Sector Staff in Central Region

Paul Andoh

doi:10.7176/ejbm/12-26-06

Abstract

The paper focused on exploring the management of tier 2 of the 3 tier pension scheme in Ghana. The papers focuses on the public sector staff assessment of the extent to which the tier 2 could smoothen their consumption on retirement and the effectiveness of the management of the tier 2. The paper was motivated by the fact that while the tier 1 is a common knowledge to most workers, the tier 2 data are not too obvious. Therefore, it is critical to assess how this could affect workers’ perception about the management of the tier 2. The paper employs data from metropolitan, municipal and district assemblies (MMDAs) in Central Region of Ghana. Pure qualitative research approach was employed within the framework of exploratory design.The paper revealed that the participants perceive that the tier 2 could not contribute significantly to smoothen their future consumption on retirement. It was also found that participants doubt the effectiveness of the tier 2 of the pension scheme due to inadequate information and weaknesses in transparency. The paper concluded that the effectiveness of the Tier 2 pension management is not satisfactory. The paper further revealed that many of the people in the public sector cannot ascertain the true benefit of the Tier 2 scheme on their future pension. It is therefore recommended for government to organise workshops or seminars to educate their employees in the public sector on their pension schemes, identify the prospects and challenges associated with the scheme early enough to assist workers to make informed decisions about their retirement. Keywords: Three Tier Pension Scheme; Mandatory Tier 2, Smoothen Consumption and Pension Benefits DOI: 10.7176/EJBM/12-26-06 Publication date: September 30 th 2020

Highlights

The increasing proportion of older persons in population across all rafters of the world has given rise to an increasing need to ensure financial security for this growing number of older persons
5.1 Conclusion and Recommendation The study examined the management of the Tier 2 pension scheme in the public sector and its impact on staff pension (Smoothen consumption and effectiveness)
The focus was on the MMDAs in the Central Region of Ghana

Summary

Introduction

The increasing proportion of older persons in population across all rafters of the world has given rise to an increasing need to ensure financial security for this growing number of older persons. The concept of aging population and the principle of unforeseen contingencies has necessitated the need for interventions to protect and care for people in their old age This protection against unforeseen contingencies of old age was performed by families and charity organisations. Almost all countries, including those in Africa have set up vibrant institutions regulated by laws to formulate policies aimed at protecting people in their old age. To achieve this, these institutions make provisions for workers to save some percentage of their income (while working) in the form of insurance which protect them once they are retired. The implication is that a pension scheme should be seen as a social and economic necessity that society should embrace in the quest to alleviate poverty and provide economic security that will enable individuals to cope with life’s major risks

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Conclusion