Understanding Ghana's National Pension Act (Tier 1, 2, and 3)!

Ghana's National Pension Act (Act 766), enacted in 2008, established a comprehensive three-tier pension system designed to provide social security and retirement benefits to workers in both the formal and informal sectors. The pension system ensures that Ghanaians have access to sustainable retirement income, providing security in their later years. Understanding the three tiers can help you make better financial decisions for your future.

  • Tier 1: Basic National Social Security Scheme (Mandatory):
    • Who Contributes: Both employees and employers
    • Contribution Breakdown: Employee: 5.5% of basic salary, Employer: 13% of employee's basic salary
    • Managed by: Social Security and National Insurance Trust (SSNIT).
    • Benefits: Provides monthly pensions, survivor benefits (for your dependents), and disability pensions if you can no longer work due to injury or illness.
    • Tax Benefit: Contributions are tax-deductible, which reduces your taxable income.
  • Tier 2: Occupational Pension Scheme (Mandatory):
    • Who Contributes: Employers contribute 5% of your basic salary
    • Managed by: Licensed private pension fund managers
    • Benefits: Provides a lump sum payment when you retire, in addition to the monthly pensions from Tier 1.
    • Tax Benefit: Your money grows tax-deferred, meaning no taxes are paid on the investment growth until you withdraw the funds
  • Tier 3: Voluntary Provident Fund & Personal Pension Scheme (Optional):
    • Who Can Contribute: Anyone! This tier is voluntary, meaning employees, employers, or self-employed individuals can contribute
    • Managed by: Private pension fund providers
    • Benefits: Offers additional savings to boost your retirement fund, with the flexibility to withdraw portions if needed (after a minimum of 10 years).
    • Tax Benefit: Contributions are tax-deductible, meaning you pay less tax today. The returns on your investments are also tax-free
Key Takeaways
  • Multiple Income Streams in Retirement: Monthly pensions from Tier 1 and lump sum payments from Tier 2.
  • Tax Efficiency: Contributions reduce your taxable income, and your money grows tax-free in Tier 2 and Tier 3.
  • Flexibility: You can boost your retirement savings at any time with Tier 3.
  • Private Fund Management: Tiers 2 and 3 are managed by professional private pension funds for better growth potential
Why Its Important

Ghana’s pension system offers financial security through different tiers, so you're not relying on one source of income in retirement. With tax benefits and growth potential, planning your retirement today ensures peace of mind tomorrow.

Take Action Now with CedisPay

Use the CedisPay Financial Wellbeing App to track your pension contributions and ensure you’re saving enough for a comfortable retirement.

Trusted by over 1000 small businesses and individuals in Ghana

The Future is Us.

Belong to a place where you are financially supported.

Looking for financial support? Reach us

Contact us  
CedisPay - Group photo