As many as 7.7 million people, representing 70 percent of the country’s over 11 million active labour force, are non-active pension contributors – a situation that many believe could erode efforts to end poverty, especially among the aged.
The situation is even more dire in the informal sector, where coverage is at a lowly 3 percent despite the sector accounting for over 7.9 million of the total active workforce in the country, data from the 2019 report of the National Pensions Regulatory Authority (NPRA), the sector’s regulator, have shown.
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).
While the low pension coverage is indicative of opportunities in the industry, Kwame Boateng – a labour expert, says it means a majority of today’s active labour force, along with their dependents, will most likely suffer from poverty, poor health, among others, when they eventually retire. “We are sitting on a very serious crisis if about 70 percent of the active labour force are not contributing toward their retirement,” he lamented.
Ideally, he said, an active worker contributes to social security schemes or programmes, either 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.
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 Mr. Boateng, the key to improving on pension coverage in the country is to intensify public education, particularly among informal sector workers where coverage is very low. “More needs to be done,” he said, adding that “people need to understand that taking care of your child’s education is very important – but is not the same as contributing a fraction of your earnings to a retirement plan or social security.”
He believes that innovative pensions products that leverage the mobile money boom could help rope-in more contributors from the informal sector, adding: “Apart from the fact that most informal sector workers lack knowledge about the importance of pensions, I think innovative and tailor-made pension schemes which make it convenient for them to contribute remains a challenge”.
Since 2010, the country has been implementing a three-tier pension scheme under the National Pensions Act, Act 766. The first tier – or the BNSSS – is managed by the Social Security and National Insurance Trust, while the second tier is a defined contributory occupational scheme mandatory for workers: and the third tier is a voluntary scheme that includes provident funds and all other pension funds outside tiers one and two, and is privately managed by both corporate trustees and fund managers.