KEY CHANGES TO OLD SOCIAL SECURITY
- Reduced number of qualifying years from 20years (240 months) to 15years (180 months). Minimum age for drawing benefits is still 55years.
- Reduced total amount of contributions to SSNIT. That is, 11% out of the 18.5%. However, 5% of the 18.5% will now go into full private management where you can enjoy lump sum benefits.
- Employees with fewer than the minimum 15years qualifying years will be entitled to a lump sum benefit but loses out on a monthly pension income.
- SSNIT shall pay monthly pension incomes only and no more 25% one off tax-free cash lump sum.
- Guaranteed period of enjoying benefits is increased from 12years to 15years. Guaranteed period is the number of years an employee enjoys pension benefits after retirement.
- If a retiree dies before the expiration of the guaranteed period, the remaining benefits will be paid as a lump sum to his/her beneficiaries.
- Tax exemptions for all provident funds with NPRA.
- With the new scheme, you can earn a pension right of between 37.5% and 60% when you contribute a minimum of 15years or 180 months into the scheme at the time of your retirement.
- Additionally, you enjoy 0.9% per year or 0.075 per month on every extra year or months you contributed into the scheme.
- In a case where the months are not a full year or 12 months, the method in calculating the three best years is different. In this case, the average of best 36 months is used instead of the straight three best years’ average. You count backwards to get the full 36 months.
- Calculation of pension right depends on your age at retirement and the number of months you have contributed into the scheme.
- An employee who has not attained the retirement age may withdraw all or part of the accrued benefits from a scheme after ten years from the date of first contribution in the case of provident fund or personal pension scheme.
- Point (12) above however, does not apply if an employee has been certified to be incapable of normal gainful employment due to a permanent physical or mental disability; or as part of a person’s estate for his/her beneficiaries if he/she dies.
- Tier 1 is a defined benefit scheme and contributions are fully tax -exempt and are managed by SSNIT.
- Tier 2 is a defined contribution scheme and contributions are fully tax-exempt and privately managed by NPRA licensed service providers.
- Tier 3 is an optional contributory scheme with monthly contributions of up to 16.5% of the employee’s basic salary. It is tax-exempt. If an individual has been in the scheme for ten (10) years or more, he/she will receive all contributions made under the scheme in addition to all returns earned on their contributions at the time of exit. In the event of an exit prior to the contributor’s tenth anniversary, a marginal tax rate of 15% will be applied to the contributor’s total redemption amount.