A report by the Institute of Fiscal Studies (IFS) titled ‘Pensions Coverage and Benefits in Ghana’ has revealed that only a handful of people in retirement, i.e. age 60 and above, receive pension pay monthly – confirmation that a large chunk of these worked in the informal sector during their active service.
According to the policy think-tank, of 1.9 million people in the retirement age-bracket, only about 270,000 – representing just 14 percent – are enrolled on pensions. Again, the report adds, there is a sharp gender disparity between men and women in retirement. Men aged 60 and above are three times more likely to receive a pension than women of the same age – indicating that a lot more women are found in the informal sector than men, as few people in the informal sector have pension schemes.
Furthermore, compared to the northern part of Ghana, people living in the south of Ghana are about twice as likely to be receiving a pension – again implying that the northern part of the country leans more toward informal jobs than those in the south.
A Research Fellow of the IFS, Leslie Dwight Mensah, said there is a need for the National Pensions Regulatory Authority (NPRA) to understand the informal sector very well and come out with an approach that serves their need in order to encourage workers there to contribute to pensions.
“With regard to the informal sector, the Pensions Act of 2008 laid down a framework for providing coverage for them. But we now have to actualise that framework, and that requires we understand the informal sector’s characteristics.
“Things like what kind of work do they tend to do, or what sectors of the economy are they found in; what is their demography—how many are men, women; in what operations do each age-bracket tend to be concentrated in; what areas of the country do they tend to be concentrated in; what industry do they tend to be concentrated in, among others.
“For example, about 40 percent of people in the informal sector are found in farming. These things must be understood by the regulator and the industry. Once these things have been understood, they need to be educated so that they can become aware of the need to save toward their retirement. And once they are educated and have an appreciation of the need to plan and save toward their retirement, that will create the demand in them for pension products and pensions schemes,” he told the B&FT.
Again, he recommended that the NPRA and industry players must come out with practical and tailored guidelines for the informal sector, taking into consideration their unique characteristics.
“And on the supply side, talking about the NPRA and players in the industry, with the understanding of the characteristics of the informal sector, they should design and operationalise pension schemes and products that respond to the informal sector’s peculiar needs.
“Again, the NPRA needs to develop guidelines to regulate the informal sector pension scheme. For example, in the formal sector, the statutory requirement age of retirement is 60. But it may not be workable in the informal sector. So, guidelines in areas like these will facilitate creation of the scheme to attract persons in the informal sector,” he said.