An assessment of the returns on employee pension fund investments and their impact on future benefit payments: A Case Study of Social Security and National Insurance Trust (SSNIT)

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The Social Security and National Insurance Trust (SSNIT) was established to administer the National Social Security Scheme in 1972 under the NRCD 127. The trust started the scheme as a provident fund until 1991 when it was converted into a pension scheme under the Social Security Law (PNDC Law 247). SSNIT has a primary responsibility to collect contributions to pay pensions and other benefits as they fall due. In fulfilling this responsibility, the funds collected are invested to generate additional income to augment the contributions of members. The payments provide income for members who are unable to continue working due to invalidity, old age, and in the event of sickness or death of the breadwinner. In recent times some doubts have been expressed on the ability of the scheme to pay pensions in the future because its investments have yielded low returns. This research sought to analyze the various investments returns made by SSNIT over a specified period and assessed their impact on the capacity of the fund to make future benefit payments. The case study approach was used in this research and the results showed that the returns on SSNIT investment were generally below the returns achieved by other investment funds over the study period. The effect of inflation on the returns of the fund was significant with the fund recording negative real return in some years. It was also found that inadequate investment expertise at SSNIT may have contributed to the low returns recorded by the organization. Though the benefits paid grew steadily, the contributions received also increased on yearly basis and were always higher than the benefits paid. High returns on the excess funds that are invested would enable the pension fund meet its future obligation to workers.
A thesis submitted to the Institute of Distance Learning, Kwame Nkrumah University of Science and Technology in Partial Fulfillment of the requirements for the degree of Commonwealth Executive Master of Business Administration, May, 2011