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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Copyright @Redeemer Yao Krah
2014
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

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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
Consolida
ted
Departme
nt 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

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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.

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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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20
Calculation of full pension
A lecturer contributes to basic
national security scheme from May
12
th
, 1977 and retires as a
professor on 12
th
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

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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.

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