The Pension sector has witnessed some reforms like the issuance of a consumer protection policy and the passage of an executive instrument to allow for the prosecution of non-compliant employers, however, Pension contribution remain low especially in the informal sector affecting contribution growth.
In Ghana an active worker contributes to social security schemes or programmes, which are publicly or privately managed, to provide income protection for its members in the event of certain occurrences as old age, invalidity, sickness or death of a breadwinner.
Recent data suggest that despite an active labour force of approximately 11.5 million an average of about 70 percent do not actively contribute to Pension schemes which is likely to affect such individuals at a later time when they are no longer fit to work.
Although the Pensions sector continued to expand according to the latest financial report, there are emerging vulnerabilities from weak investment outturns, weakened contribution growth and rising benefit payout.
Notwithstanding, analysts suggest that with these vulnerabilities, the Pensions sector exhibits a strong potential for growth in the medium to long term as policy measures are targeted at increasing contributions’ flows and inclusion.
Broadly, the Pensions sector exhibits strong potential for growth in the medium to long term as policy measures are targeted at increasing contributions’ flows, improving sustainability of the public pension fund and broadening the third tier scheme via the inclusion of the informal sector.
“The sustainability ratio, (measured as investment income to total expenditure) and the fund ratio (fund size to its liabilities) of the public pension fund declined to 0.09 and 2.60 respectively.
“The consistent rise in benefit payouts from the public pension scheme amidst a stable dependency ratio (pensioners to active contributors) suggests that enforcement of mandatory contributions and optimisation of investment returns remain critical in ensuring the sustainability of the public pension fund”.
The recent launch of the National Cocoa Farmers Pension Scheme is an excellent example of the government’s commitment to ensure more extensive Pension coverage in the informal sector but this has still not improved significantly.
The National Pensions Regulations Authority is working tirelessly to tackle issues affecting stakeholders under the current Pension scheme. “The government is also leaving no stone unturned to resolve all outstanding issues in the implementation of reforms, especially to address retirement benefit challenges under Act 766”. The NPRA CEO Mr.Attah-Krufi said.
Meanwhile, of the total active contributors 1.7 million are private pension contributors, with 1.6 million on the Basic National Social Security Scheme (BNSSS).
According to the International Labour Organisation, the twin objectives of Pension systems are to reach all older persons in need – and to do so at an appropriate monetary level of benefit in provision.
Globally, Pension or retirement income is so crucial it is considered essential for society to ensure that its members have it.
To improve on Pension coverage in the country there is a need to intensify public education, particularly among informal sector workers where coverage is very low on the importance of a retirement plan.
Also there is a need to introduce innovative means by which financial inclusion can be promoted with regard to the payment of Pensions.
Analyst have also suggested that Pension funds must be invested smartly hence, there is a need to invest contributions in entities with good returns in order to attract good yields for subsequent payouts to beneficiaries.
