The International Labour Organisation (ILO) has painted a gloomy picture of the reserves of the Social Security and National Insurance Trust (SSMIT).
The international body issued a stark warning about the potential collapse of SSNIT reserves by 2036. This grim outlook arises from an actuarial valuation study assessing the viability of SSNIT, suggesting that the total income derived from contributions, investment income, and other sources will not be sufficient to cover annual expenditures, including pension benefits, by 2029.
According to the ILO report, “Starting in 2029, total income (contributions, investment income and other income) is no longer sufficient to pay for annual expenditures. The reserve starts to decrease. During the year 2036, the reserve drops to zero,” the research produced on myjoyonline emphasised.
This looming depletion signifies that SSNIT’s reserves, which have been used to cover payment shortfalls, will eventually run dry. The reserve ratio, which measures the end-of-year reserve over the annual expenditures for the year, is expected to fall from 3.4 to 0 between 2031 and 2036, indicating a dire financial future for SSNIT. Without contributions, investment income, or other sources of revenue, the trust would be unable to fulfil its obligations to pensioners.
A significant factor contributing to this crisis is the government’s delayed payments to SSNIT. The valuation report revealed that of the GH¢9.35 billion total owed to SSNIT as of December 31, 2021, a staggering 73.7%, or GH¢6.9 billion, resulted from late payments by the government. This delay also impacts SSNIT’s ability to generate returns on its investments, with an estimated 1.3% drop in expected returns due to these late payments.
The ILO report underscores that such delays not only strain SSNIT’s financial stability but also place a burden on the private sector. The study concludes that “Past experience suggests that, by not paying on time and not paying the interest income on delayed contributions, the Government shifts an important part of the cost to the private sector”.
