TRUSTEESHIP OF PUBLIC PENSION FUNDS AND ASSETS: SALE OF SSNIT EQUITY IN HOTELS

 INTRODUCTION

The proposed sale of SSNIT's (Social Security and National Insurance Trust) 60% equity in four hotels—Labadi Beach Hotel, La Palm Royal Beach Resort, Ridge Royal Hotel, and Elmina Beach Resort—to Rock City Hotel, owned by Bryan Acheampong, a politician and Minister of Food and Agriculture, has sparked considerable controversy in Ghana. This move has met significant opposition from civil society organizations and labour groups, including the Trade Union Congress (TUC) and the Civil and Local Government Staff Association of Ghana (CLOGSAG). The sale raises complex issues related to pension scheme governance, ethics, conflict of interest, and political influence.

At the heart of this controversy is the trusteeship of public pension funds and assets. Public pension funds play a crucial role in ensuring the financial security of retirees by providing a steady income during their retirement years. These funds, often managed by government agencies or public entities such as SSNIT, require diligent oversight to ensure responsible and sustainable management. Central to this oversight is the Board of Trustees (BOT), a group of individuals tasked with the fiduciary duty of safeguarding these funds for the benefit of their contributors and beneficiaries.

This article aims to examine the critical role of the Board of Trustees of SSNIT in managing public pension funds. It will explore the responsibilities and obligations of the trustees, the current governance structures in place, and the challenges faced by those in trusteeship positions. Additionally, recommendations will be made to ensure effective oversight, thereby maintaining the integrity and sustainability of public pension funds. By addressing these key areas, we can better understand the implications of the SSNIT hotel sale and the broader issues of trusteeship in public pensions.

TRUSTEESHIP OF PUBLIC PENSION FUNDS

Trusteeship of public pensions involves the fiduciary management and oversight of pension funds by a Board of Trustees (BOT). These trustees are tasked with ensuring that the funds are managed in the best interests of the beneficiaries, typically public sector employees, and that the funds remain sustainable for current and future retirees.

This role is critical and requires a high level of fiduciary responsibility, ethical integrity, and strategic oversight. Trustees must balance the need for prudent investment management with the obligation to protect the interests of beneficiaries, ensuring the long-term sustainability of the pension funds. Key components of successful trusteeship include effective scheme governance, compliance with regulatory standards, transparent communication, and, most importantly, fiduciary responsibilities.

ROLE OF BOARD OF TRUSTEES

• Composition and Influence of  Members of SSNIT Board of Trustees (BOT)

Currently, the BOT under section 35 (1) of The National Pensions Act 2010 (Act 766) as amended, is composed of 13 members from a mix of stakeholders as follows:

(a) a chairperson
(b) two persons nominated by the President, at least one of whom is a woman
(c) two representatives of Employers’ Associations
(d) four representatives of Organized Labour
(e) one representative of the National Pensioners’ Association
(f) one representative of the Ministry responsible for Pensions not below the rank of a Director
(g) one representative of the Security Services who is not a member of the Ghana Armed Forces
(h) the Director-General of the Trust

Legally, the President is supposed to have only two nominees on the Board of Trustees (BOT) and in practice has added the chairperson since the law is silent on who becomes the chairperson, making it 3 out of the 13 trustees. Technically, the President may also have some influence over the representatives from the ministry responsible for pensions and the Director-General of the Trust. Since BOT decisions are made by majority vote, the President’s influence in the best-case scenario amounts to only 5 out of the 13 votes. Given this composition, the President and, by extension, the Executive, cannot be said to control the BOT unless the term "appointment" is clarified, as section 35 (2) of Act 766 states that "members of the Board of Trustees shall be appointed by the President in accordance with article 70 of the Constitution."

Article 70 of the Constitution requires the appointment to be made in consultation with the Council of State. Does “appointment” mean an approval process that requires the final concurrence of the President in consultation with the Council of State as a formality? Or does the President actually have the authority to choose or determine the institutional representatives on the board as well, aside from the two nominees specifically mentioned? Can the President reject the representatives of, for example, organized labour because of section 35(2) of Act 766? Or is it just procedural that once the institutional stakeholders give their nominees, it is the President who is wielded with the Constitutional authority to conclude the formation of the board? The learned people will have to interpret that.

The Executive can only be deemed to have control over the BOT if by "appointment" the President directly appoints individuals from the institutional stakeholders to the SSNIT board. If this is not the case, the BOT’s decisions cannot legally be considered influenced by the Executive. Members of the board of SSNIT must be held individually and collectively responsible as trustees of the fund, owing a fiduciary duty to the contributors. If trustees allow their decision-making to be influenced, it is their responsibility alone, as the duties and liabilities of a trustee are personal, not vicarious to those they represent. Whether a trustee is appointed by the President or represents organized labour, any legal action against the board is not an action against the President or organized labour; it is against the individual trustees. In such cases, trustees are personally accountable for their actions.

• Scheme Governance

The BOT is required under Section 35(3) of Act 766 to ensure the proper performance of the functions of the Trust. In the context of a Trust with institutional representatives, this means that the members hold ultimate responsibility for the governance of the Trust, not the stakeholders they represent or who nominated them. Each member, both individually and collectively as a board, must ensure the assets of the Trust are safeguarded and that they act in the best interest of the beneficiaries while avoiding conflicts of interest.

Under Act 766, the BOT of SSNIT comes under the regulation of the National Pensions Regulatory Authority (NPRA).

 

• Investment Risk Management

The BOT must regularly identify and assess risks that could affect the fund’s ability to meet its obligations. The risk appetite of the Trust concerning various investment vehicles or asset classes must be documented through guidelines and approved by the BOT. In approving such investment guidelines, the BOT must be mindful of their fiduciary duties owed to the beneficiaries, the workers. Risk appetite is determined with a long-term view of the investment climate, taking into consideration the investment assets classes and vehicles available, together with the dynamics of the economy as projected. It is a strategic document that is reviewed at determinable times and not tinkered with unless there is a drastic change in the economy that warrants an immediate review.

• Fiduciary Duty and Ethical Considerations:

The term "fiducia" embodies the essence of trust and confidence in a relationship, often seen in fiduciary duties where one party relies on the integrity and honesty of another. The concept of integrity, while not legislated, is crucial and is often measured by the "prudent person" rule. This rule is a legal standard that requires a person to act with the care, diligence, and judgment that a reasonably prudent person would use in similar circumstances.

The Board of Trustees, therefore, owes fiduciary duties—a legal obligation—to their beneficiaries. These duties include acting in the best interests of the beneficiaries, maintaining transparency, avoiding conflicts of interest, and managing the trust property prudently. This legal obligation requires trustees to uphold a high standard of care, loyalty, diligence, and judgment in their decision-making processes.

A breach of fiduciary duty, including self-dealing, negligence, failure to act in the best interest of the beneficiaries, or actions that prioritize the fiduciary’s interests over those of the beneficiaries, is justiciable. In such cases, the trustees can be held jointly and severally liable for any resulting damage, similar to the liability faced by a company’s Board of Directors for serious breaches.

• Communication and Reporting

The Board of Trustees (BOTs) are not lords unto themselves, acting on their own behalf. They represent the interests of the beneficiaries, the workers. It is essential for BOTs to engage with, communicate to, and report regularly to the beneficiaries on the performance of their funds. Additionally, the regulator must enforce standardized risk reporting and require prudential returns from the BOTs to ensure the workers' interests are well protected.

ROLE OF THE REGULATOR

The National Pensions Regulatory Authority (NPRA), as outlined in section 7 of Act 766, is responsible for regulating and monitoring the implementation of the Basic National Social Security Scheme. Additionally, the NPRA is tasked with sensitizing the public on matters related to various pension schemes, receiving and investigating complaints of impropriety in the management of pension schemes, and addressing grievances from pensioners to provide redress.

NPRA holds a critical responsibility in safeguarding the interests of contributors and beneficiaries of the Social Security and National Insurance Trust (SSNIT) scheme. The NPRA must ensure that its actions, or lack thereof, do not result in financial harm to the scheme. It is their duty to make sure the Board of Trustees (BOT) of SSNIT are accountable for any inactions, actions, commissions, or omissions that may adversely affect the financial health of the SSNIT scheme.

DISINVESTMENT IN HOTELS

Having explored the concept of trusteeship and the obligations of the Board of Trustees (BOT) of a pension fund, let us now address the issue of SSNIT's disinvestment in the four hotels. The BOT of SSNIT has a fiduciary duty to manage pension funds and assets responsibly. This duty includes ensuring that the sale of high-value assets such as these hotels aligns with the long-term interests of pensioners, thereby securing their financial future and sustaining the pension fund.

SSNIT is a public pension fund, and its members comprise the general working population contributing to the fund. These contributors essentially own the Trust, similar to how shareholders own a company. Consequently, the corporate governance relationship between company directors and shareholders applies to the relationship between the BOT of SSNIT and its contributors. This analogy emphasizes the BOT's duty to act in the best interest of the contributors, ensuring transparency, accountability, and prudent management of the Trust’s assets.

• Strategic Investment Direction and Policy

The hotels are strategic assets, and their sale must be planned in advance within an approved strategic framework supported by an investment policy accessible to the fund’s beneficiaries. Unless there is an unforeseen economic downturn significantly affecting an asset class, such assets cannot be sold as a routine transaction like financial instruments such as bonds or bank securities.

The decision to invest in or divest from strategic assets like hotels must be planned, agreed upon, and approved as part of a long-term strategy. Contributors, akin to shareholders of a company, need to be informed of such major decisions. Companies achieve this through shareholders' meetings for approval, and public pension funds like SSNIT must similarly engage with contributors. Given the institutional representation of workers through their labour unions, contributors could be said to have received constructive notice of the sale, with their representatives being responsible for providing actual notice to the contributors.

In any case, the sale of these strategic assets should not proceed without prior consent or a “no objection” from the Regulator, ensuring that the workers' interests have been properly considered. This oversight helps confirm that the decision aligns with the fiduciary responsibilities of the BOT, maintaining the financial health and sustainability of the pension fund for its beneficiaries.

In a publication in the Business and Financial Times dated July 4, 2024, titled “SSNIT shifts investment strategy,” it was reported that SSNIT has indicated a strategic shift towards a fixed-income portfolio. The rebalancing of the asset allocation of the current portfolio valued at GHS16.7 billion as of 2023 shows a significant move. Previously, the portfolio had 49.3% in equities, 34% in alternative investments, and 16.7% in fixed income. SSNIT now intends to double its fixed income allocation to 48.8% while substantially reducing its equities and alternative investments.

All pension schemes operate within the same investment ecosystem, and the opinion of the NPRA on this strategic shift is crucial. Notably, the regulator’s latest Guidelines on Investment of Tiers 2 and 3 Pension Scheme Funds (NPRA/GD/INV/03/20) gazetted on September 14, 2024, contrast with SSNIT's new direction. The regulator encourages Tiers 2 and 3 funds to invest in equities and alternative investments to stimulate economic growth, whereas SSNIT is now aiming to do the opposite. This out-of-turn decision raises questions. Is SSNIT facing a cash flow or liquidity challenge, hence the decision? Is it a non-financial decision to just bring liquidity into the market to support the government without considering the impact on the scheme? Is it a self-serving decision to bring fee income to some related party fixed-income brokers? Or is it based on recommendations from an actuarial valuation?

Given the recent experiences of bondholders facing haircuts on their investments and the possibility of further cuts predicted by some investment experts, this strategic shift towards fixed income warrants thorough scrutiny. This shift places the Board of Trustees under closer examination regarding their fiduciary obligations.

The decision to rebalance the portfolio, along with a clear justification to members of the scheme and the subsequent concurrence of the regulator, should ideally have been made before the sale of the hotels. Such a pre-sale strategy would have aligned the sale with SSNIT's intent. It cannot be convincingly argued now that the hotel sales were driven by this strategic shift towards fixed income. Instead, the post-sale announcement of this strategy appears to be an afterthought to justify the sale, which seems incongruent. The NPRA should clarify the soundness of this strategic shift to fixed income and its potential impact on the economy if they have no objections. Under Act 766, SSNIT is no longer autonomous in its decisions and must adhere to regulatory oversight.

• Role of the Regulator in the Sale Process

The National Pensions Regulatory Authority (NPRA) plays a critical role in ensuring the integrity and sustainability of public pension funds managed by the Social Security and National Insurance Trust (SSNIT). Under section 7 of Act 766, the NPRA is tasked with regulating and monitoring the implementation of the tier-1 scheme. This includes setting standards, ensuring compliance, and safeguarding the interests of pension scheme members, the workers.

The NPRA's responsibilities in regulating SSNIT encompass several key areas:

1.     Public Sensitization: The NPRA is responsible for educating the public on matters related to pension schemes. This includes informing contributors about the performance of their funds as well as any significant changes or decisions, such as the disinvestment from major assets like hotels, if a “no objection” is to be given by them.

The law gives us the power to do something, but leadership shows us how to go about it. Issues relating to pensions are emotive, and stakeholder engagement with the beneficiaries of the scheme is a regulatory leadership trait that should not be ignored to remove the tension from the pension. Indeed, leadership cannot be legislated as it is inherently subjective, shaped by individual styles and circumstances. However, there are best practices that leaders can follow to ensure the effective exercise of legislative power, promoting social harmony and justice. These practices include transparency and accountability, inclusivity and participation, as well as communication to navigate the complexities of governance for a harmonious society.

2.     Complaint Investigation and Redress: The NPRA is mandated to receive and investigate complaints of impropriety in the management of pension schemes. This function is particularly crucial in the context of SSNIT’s disinvestment in hotels. When concerns arise, the first point of call for contributors should be to notify the NPRA. By involving the NPRA, contributors ensure that there is oversight in handling reports of wrongdoing or unethical behavior in the administration of the SSNIT scheme. The NPRA must scrutinize whether the Board of Trustees (BOT)’s actions were in compliance with their fiduciary duties and served the best interests of the scheme members. This process not only addresses the immediate concerns of the contributors but also reinforces the regulatory framework that safeguards the integrity of the pension system.

Organized labour sought audience with the President on the sale of the hotels. This I guess may have been a moral suasion gesture to get him to impress on his minister to back off from the transaction and not to get SSNIT to stop the transaction. The President is not a trustee of the SSNIT fund and cannot be legally held responsible for the decisions of BOT. Should he have a view on how the Trust is run, the option he has is to lobby his representatives on the board. He cannot force them. In fact, they have the option to resign should they disagree with the President, but once they do listen to him, the decision is personal to them as fiduciaries. It is therefore not surprising that it was the Regulator that put a hold on the transaction as part of its regulatory oversight. The buck stops with the Regulator, not the President.

3.     Oversight of Major Transactions: The sale of high-value assets like hotels should have involved prior consultation with the NPRA to ensure such decisions are made transparently and in accordance with regulatory guidelines. The NPRA must have reviewed and given a “no objection” to such transactions to confirm they align with the long-term strategy and financial health of the pension fund. The Regulator was not heard of until the contributors started agitating and suspended the transaction. What does suspending the transaction mean? Is it that the Regulator had no formal idea about the transaction until the contributors started agitating? If they did, why were they quiet on it until it escalated into a demonstration? The Regulator also owes a duty to the scheme members to give an opinion on the whole transaction.

NPRA must ensure that contributors are well-informed about their regulatory involvement throughout the process. If the NPRA later decides to issue a "no objection" to a sale after an initial suspension, a stakeholder engagement is crucial. This engagement is necessary to assure and justify to contributors that the decision is made in the best interest of the scheme and is driven by consumer protection principles, fair market value of the assets, rather than political influence. This will build trust, transparency, address concerns, and demonstrate that they have in good faith executed their supervisory role, avoiding any legal, ethical, or reputational issues for the Regulator.

·       Alternative Investment Vehicle

Devoid of the politics of the sales, even if the trustees are acting in good faith and taking the best decision in the interest of the scheme, the alternative investment option with respect to off-loading investments in the hotels must be sound. The investment analysis must adhere to the “prudent person” yardstick, where the entire portfolio is evaluated instead of focusing solely on individual investments such as the hotels. Decisions concerning Defined Benefit schemes like the SSNIT scheme should be based on actuarial valuations of the fund and its ability to meet future obligations. These decisions are not ordinary business decisions to be made in isolation.

Several critical questions should guide the decision-making process:

• Does the future outlook of the Ghanaian tourism industry appear bleak?
• What is the long-term impact of the tourism industry on the scheme?
• Did the pandemic affect the hotel industry and consequently the profitability of the hotels?
• Is the situation a systemic risk and will it improve over time?
• If it is a systemic risk in the hotel industry, why is another hotelier in the same economic environment interested in buying them?

These analyses should be part of the decision-making process rather than focusing solely on the current state of the hotels with respect to profitability.

It is important to note that if SSNIT has not outsourced the management of the hotels to experts in hotel management and is directly responsible for their management by appointing the management team, the Board of Trustees owes a fiduciary duty to appoint the best hotel management team. Failure to do so and subsequently deciding to sell the hotels on the basis that they are not profitable raises questions about whether the trustees have met their fiduciary obligations under the “prudent person” rule. The scheme should not suffer due to the trustees' inactions and omissions in the management of the hotels and cover these shortcomings with a sale. This is problematic.

• Suit against the Board of Trustees Jointly and Severally

In normal company law, courts have been reluctant to interfere in decisions of the Board of Directors or question the correctness of internal management decisions honestly arrived at within their powers, except for unlawful decisions. However, with respect to trusteeship, there have been cases in other jurisdictions where the Board of Trustees of pension funds were found to have breached their fiduciary duties by not exercising the required standard of care and diligence in their investment decisions, resulting in financial harm to the beneficiaries. They were held personally liable for the losses incurred by the pension fund.

Should the sale proceed despite the agitation of some contributors, there exists the possibility of a class action against the Board of Trustees (BOT) of SSNIT jointly and severally if it can be proven that they have acted in breach of their fiduciary duties without good faith and against the interest of the scheme. Additionally, institutions that have representation on the board should be able to sue their representative if they believe that their representative did not seek their interest and breached a fiduciary duty to the scheme members.

In such a situation, the Trust may bear the cost of legal fees for trustees as a board once sued jointly. However, where each member is sued in their own capacity as trustees owing a fiduciary duty to the beneficiaries of the scheme, they might have to defend themselves. Only under these circumstances will trustees of pension funds, in general, work in good faith in the interest of their members and be mindful of their individual actions or inactions on the board, avoiding collective voting akin to parliamentarians. Being on the SSNIT Board will no longer be taken up by just anybody.

Following due process legally in the sale of the hotels is not the only requirement for a trustee on the SSNIT board. There are other considerations for a breach of trust concerning the soundness of the decision. Whether the sale of the hotels involved transactions under value, causing harm to the trust assets or beneficiaries, whether it was in the interest of the scheme, whether there were any self-serving actions or insider dealings, and other qualitative issues related to a trustee’s fiduciary duties must be considered. At this point, each trustee answers for themselves since they are representatives of a class of contributors to whom they are accountable.

In this particular instance where the sale is to a known member of the Executive, a minister of state, an appointee of the President, the board chairperson and nominees of the President on the SSNIT board as appointees of the President should be answerable for perceived self-serving actions in favor of another appointee of the President. They may have to clear that hurdle in court.

As a trustee, if the contributors you represent oppose the sale of their assets to a particular entity and you insist on proceeding with the sale, you must consider what you stand to gain and whether it is worth the potential legal suit against you, which you may win or lose, with the possibility of personal liabilities should you lose. It is difficult to understand why one would take such an unnecessary risk that “kyekyenaa” you will sell. Is it because there is no precedence in Ghana of trustees of pension funds being sued?

If the transaction is forced through and it can be demonstrated that the trustees did not act independently in the interest of the scheme or were unduly influenced by political considerations with clear indications of a lack of an arm's length transaction, the legal implications could be significant. Specifically, if it can be shown that the decision was not based on a thorough analysis of the future value of the hotels and their potential for revenue generation, including an actuarial valuation as a defined contribution scheme, serious fiduciary breaches may arise. Additionally, if the Regulator did not provide a "no-objection" or prior approval of the transaction, issues relating to the lack of duty of loyalty and duty of care with respect to fiduciary obligations to the beneficiaries of the scheme could be levied against the Board of Trustees (BOT) both jointly and severally.

Regarding the National Pensions Regulatory Authority (NPRA), failing to fulfill its regulatory duties, investigate complaints, or ensure compliance with fiduciary obligations exposes it to legal liability from the beneficiaries of the scheme. The NPRA must then justify its decisions and actions concerning the sale of the hotels. In all honesty, though we may not know the outcome of any legal suit, is the scheme in such dire straits that it cannot be salvaged without selling the hotels to a particular buyer? Is this entire ordeal worth the potential legal and reputational risks for the Regulator and the individual trustees? Also, why would a buyer still want to go ahead with an investment tainted with so much controversy unless the purchase price is so undervalued and the prospects of future returns have been understated to be worth the risk?

WAY FORWARD

• Composition of Board of Trustees (BOT)

 

The BOT of SSNIT will have to be reconstituted to put more control in the hands of the owners of the scheme, the workers. The scheme does not belong to the employers, hence the representation from the Employers’ Association should be reduced to one. The Security Services are no longer contributors or beneficiaries to the scheme. Act 766 was amended in 2023 to exempt them, so they have no interest in the scheme and have to be removed. This will allow Organised Labour representation to be increased to six. With the representation from the National Pensioners’ Association, collectively, the seven being in the majority can seek the interest of workers and be responsible for their own scheme governance. In the sale of the hotels, for example, it will mean they would have sold it and cannot blame anyone but their representatives. It will, by way of governance, put to rest or at best mitigate the tension around the management of SSNIT, with the need for the Director-General to engage more with the owners of the fund who have a majority vote on the board.

 

• Responsibilities of Board of Trustees (BOT)

Being a trustee of a fund is not child's play. Although a Trust Board has similar responsibilities to the Board of a company, pension fund trustees bear significantly higher fiduciary responsibilities and duties. This is due to the nature of their role in safeguarding the retirement savings of individuals. The legal and ethical standards they must adhere to are more stringent, reflecting the critical importance of protecting beneficiaries' financial security.

Once you are nominated or appointed, irrespective of the legal nuances of the terminology, as a trustee, you are on the board in your own right with respect to your fiduciary duties and should be responsible for your decisions, including being part of a majority decision. The risks and responsibilities are personal to you and not vicarious to those who nominated you or whom you represent. While you should be accountable to the stakeholder you represent through your actions and decisions, your primary fiduciary duty is to the scheme members in general. A breach of this duty opens you up to a legal suit that is personal to you. There have been cases where former trustees have been found liable for breach of fiduciary duty in the mismanagement of trust funds.

If trustees are to be held to such high fiduciary standards, then their remuneration needs to compensate for that. This will not only attract individuals with the necessary complementary skill sets to the board but also allow trustees to take up fiduciary liability insurance to protect themselves from possible legal fees and damages.

• Meetings of Board of Trustees (BOT)

The SSNIT Board comprises representatives from various stakeholders, and each Board member owes a duty to the class of stakeholders they represent. Therefore, during meetings of the BOT, minutes should capture the individual inputs of trustees, not just the collective resolution. This approach ensures that the contributions of each member towards a decision are documented, even if the final decision is made by majority vote as required by section 38 of Act 766.

By documenting individual contributions, stakeholders can be informed about their representative’s actions on the board. Additionally, this practice allows individual trustees to defend themselves in possible legal suits should the BOT be deemed to have collectively, by majority decision, breached any fiduciary duty or acted in bad faith in their decision-making.

Proper management and documentation of the decision-making processes help demonstrate that trustees have fulfilled their fiduciary responsibilities. Board minutes must reflect both the individual perspectives and the collective decisions to ensure transparency and accountability.

• Annual General Meetings (AGM)

The BOT must hold Annual General Meetings (AGMs), similar to those conducted by private pension funds or typical companies. These AGMs are essential for fostering accountability, transparency, and member engagement. They provide a platform for reviewing financial performance, making informed decisions, and approving significant policy changes.

AGMs facilitate direct communication with members, who are the actual owners of the scheme, thereby serving as a critical check on the BOT's operations. In other jurisdictions, trustees have faced legal action of for failing to inform beneficiaries about high-value or critical transactions that unnecessarily jeopardized the scheme. Given that SSNIT is a public scheme with a large membership base, arranging the modalities for an AGM is feasible and necessary.

By instituting regular AGMs, the BOT can ensure that all stakeholders are adequately informed and involved in the scheme’s significant decisions, reinforcing the fiduciary duty owed to the beneficiaries.

• Investment Policy Guideline

The investment guidelines must stipulate that any decision to sell high-value assets to raise capital or to invest in major asset classes must be approved by the major stakeholders, particularly the workers represented by labour unions. The BOT must present the economic rationale or any significant change in risk appetite, along with justifications to the beneficiaries for approval at an Annual General Meeting (AGM). In cases of emergency, the contributors and beneficiaries should be engaged through an Extraordinary General Meeting (EGM). This approach not only ensures transparency and accountability but also protects trustees by securing stakeholder buy-in for significant decisions. Even in an ordinary company, major transactions such as mergers, acquisitions, and demergers require shareholders' consent, making it even more critical in a direct trusteeship relationship.

The investment risk appetite, along with its justifications, must be shared with the regulator, who will independently verify that the BOT is acting in the best interests of the scheme's contributors. The governance structure of the scheme should include graduated levels of approval for the Director General (DG), an investment committee of the Trust, and the BOT with specific thresholds for each.

Any investment or disinvestment in particular asset classes, especially amounts exceeding a certain percentage of the Assets Under Management (AUM), must receive approval from the contributors at an AGM and/or prior approval from the regulator. This ensures that the scheme avoids unnecessary risk exposure and that all significant financial decisions are made with the informed consent of the stakeholders with checks and balances.

In the case of SSNIT’s shift in investment strategy reported in the Business and Financial Times of July 4, 2024, the NPRA's role becomes even more crucial. SSNIT's move towards a fixed income portfolio while reducing investments in equities and alternative investments must be scrutinized by the NPRA. The regulator must ensure that this strategic shift does not compromise the financial stability of the fund or expose it to undue risks, especially in light of recent economic challenges such as bond haircuts.

The NPRA must actively engage with SSNIT to understand the rationale behind such strategic decisions and assess their impact on the scheme’s long-term obligations. By doing so, the regulator can provide assurance to contributors that their interests are being protected and that the BOT is fulfilling its fiduciary duties.

 

• Scheme Regulation and Governance

SSNIT was once a self-regulatory entity under the old Social Security Law 1991 (Act 247), which allowed it considerable autonomy. However, under the three-tier pension scheme introduced by Act 766, SSNIT, responsible for the tier 1 scheme, is now subject to the regulation and supervision of the National Pensions Regulatory Authority (NPRA). Despite this change, it appears that the BOT of SSNIT still operates with a mindset of independence from external oversight.

The NPRA must now take the lead in managing this transition and reinforcing the regulatory framework governing SSNIT. Since the enactment of Act 766 in 2010, the NPRA's focus has understandably been on supervising the new tier 2 and tier 3 schemes to ensure they are properly regulated. SSNIT, which was already operational and had established control mechanisms, may have received less attention in this regard.

It is imperative that the NPRA now enhances its capacity and establishes a dedicated division solely responsible for the supervision of SSNIT (tier 1 pensions). This division would handle the receipt of various reports and prudential returns for off-site monitoring. Additionally, SSNIT’s board minutes should be shared with the NPRA to provide insight into their decision-making processes and ensure compliance with regulatory standards during on-sight inspections.

By taking these steps, the NPRA can effectively oversee SSNIT’s operations, ensuring that the pension fund is managed in the best interests of its beneficiaries and in accordance with the law.

CONCLUSION

The sale of SSNIT's equity in the hotels to a politically exposed person raises significant concerns about the governance, ethical integrity, and fiduciary responsibilities of the Board of Trustees (BOT). This sale extends beyond legal procedural duties of having followed procurement obligations but touches on breaches of fiduciary duty and regulatory negligence.

NPRA, as the regulator, must play an active role in overseeing such transactions. If it decides to give a “no objection” after the initial suspension, it must engage with contributors to assure them that their interests are being safeguarded. The NPRA must also demonstrate that it is satisfied that the hotel sales are not due to mismanagement, which remains the responsibility of the BOT, and that efforts to turn the hotels around through proper management have failed. It cannot be that the same BOT that has the responsibility to get the hotels under proper management, including possible outsourcing, have refused to do so and now cover up with a sale. The Regulator must justify that the future of the hotel or tourism industry is not a profitable one. This business analysis must be sound to dispel the perception that the BOT has deliberately mismanaged the hotels and is now selling them to a politically exposed person to avoid legal complications. Should the Regulator give the approval, it would technically provide some level of protection for the Board of Trustees (BOT). The responsibility and scrutiny for the decision would then shift to the NPRA. However, this approval does not completely eliminate the possibility of legal action being taken against both the NPRA and the members of the BOT, jointly and severally, to test if the decision was in the interest of the contributors. This goes beyond administrative law into trusteeship with respect to the regulation and management of pension funds. Such a lawsuit could be pursued to explore and clarify the jurisprudence surrounding pension fund management and trusteeship in Ghana.

If the sale is necessary for the scheme's survival, selling the hotels to a neutral entity unconnected to the government or politically exposed individuals would alleviate concerns about potential lawsuits that the Trustees and Regulator might face. This approach would mitigate reputational risks and uphold trust in the fiduciary management of the scheme.

Regardless of the outcome of the hotel sale, the NPRA should establish a dedicated division focused on the prudent management and robust oversight of the tier-1 scheme administered by SSNIT. This specialized division would ensure that SSNIT's decisions align with the best interests of the pension beneficiaries, protecting the financial security of retirees and enhancing confidence in the management of public pension assets. This proactive measure will help safeguard the integrity and sustainability of the pension scheme, providing a more secure future for its members.