The Africa Centre for Retirement Research (ACRR) has advocated for an increase in the minimum pension amounts for retirees on the national pension scheme, which has remained unchanged for the previous three years at Ghc300.
According to the ACRR Post-Retirement Income Survey in October 2020, the pandemic has resulted in a rise in in-hospital visits among retirees, resulting in higher healthcare costs. These rise in social costs, he believes, have seriously affected the retirees buying power and hence the need for upward review of the minimum amount.
Mr. Abdullah Mashud, Executive Director of the African Retirement Research Center, intimated that the minimum pension amount (which has been Ghc300 since 2018) needs to be revised upward in 2022 to reflect actual living costs in the country.
“The increased medical costs to pensioners during the era of pandemic, due to increased hospital visitation, has forced a significant disparity between the real value of pension pay-outs and pace of inflation.”
9 per cent increment in minimum pension amounts
The ACRR has further projected an at-least fixed rate of 9 percent as the increment for each pensioner who existed at the payroll as of December 2021, given the trend of inflation these days.
“The cost-of-living adjustment to pensions for 2022, which will be based on the year-end average consumer price index, will likely see the Trust apply, at least, a fixed rate of nine percent as increment for every pensioner who existed on the payroll as at December 2021.”
Given the general decrease in consumer inflation in May this year to 7.5 per cent from 10.3 per cent in February 2021, there has been a constant increase in consumer inflation to the current level of 12.2 percent in November 2021; and this is expected to increase due to global and domestic factors: such as exorbitant fuel prices, ever-increasing transport cost, poor performances of the Ghana cedi and increasing food inflation.
The yearly adjustment’s objective is to keep retirees’ purchasing power constant by applying an inflation-adjusted index to pensions in payment. It is also to shield retirees against the excessive inflation rate and the general high cost of living in the country.
The Executive Director averred that the COVID-19 pandemic’s effects on the income of retirees, with over 8 out of 10 retirees in Ghana relying on social security pay-outs as their main source of livelihood; and averagely, each retiree has six persons who economically depend on him/her for their living.
Considering the liquidity challenges facing the SSNIT scheme, he mentioned that the manner of Pension Indexation can be enhanced to fully reflect the solidarity and risk-pooling principles on which social security thrives.
“The Scheme’s current basis of reviewing pensions needs to be looked at, especially in the face of solvency challenges the scheme is facing.”
Pension indexation is a policy for upward review of pensions in payment, as a means of preserving the purchasing power of pensioners by annually adjusting monthly pension benefits in line with an index of consumer prices; or changes in average earnings of active contributors; or a combination of both.