Pensions law ‘excludes’ 10.2m in informal sector – expert

The current pensions law has not made adequate provision for close to 10.2 million people who remain largely in the informal sector and are not captured under the three-tier pension scheme, Samuel Bediako Waterberg, a pensions expert, has said.

It is estimated that Ghana has a 12 million active workforce, out of which only 15 percent are in the formal sector and are contributors to at least one of the three pension schemes – leaving the vast majority of the workforce without any form of pension, Mr. Waterberg said.

Speaking at a workshop on micro-pensions organised by the Financial Inclusion Forum Africa on Wednesday, Mr. Waterberg – who is CEO of People’s Pension Trust – said the National Pensions Act 2008 (Act 766) does little to encourage trustees to rope workers into the informal sector.

“Currently, unlike in the formal sector where it is easy for trustees to easily mobilise funds from corporate institutions, in the informal sector trustees would have to spend fortunes looking for contributors and getting them to make regular contributions.

“So, what is happening is that because there is no special incentive for trustees to focus on the informal sector, the informal sector has become a no-go area – given the high operational costs for those who may decide to focus on that sector,” he added.

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According to him, only 27,000 workers in the informal sector are contributing to any sort of pension scheme, which is about 0.0001 percent of the entire population in the informal sector’s active workforce.

He mentioned that apart from the law not making adequate provision for the informal sector, the lack of an appropriate mode of payment beyond cash makes it very cumbersome in operating a pension scheme for the informal sector.

Also speaking at the forum, which was on the theme ‘Digitising micro-pensions: challenges and opportunities’, Ernest Amartey-Vondee, Director of Planning Research, Monitoring and Evaluation of the National Pensions Regulatory Authority (NPRA), conceded that the pensions act makes little consideration for the informal sector.

“If you look at the way the law is structured, even though it makes some provision for people who are in the informal sector to contribute into pension schemes, I believe that it can be extended beyond what the law says.

“While the law offers them an opportunity to contribute into these schemes, it doesn’t consider that they have certain peculiarities which must be recoginsed,” he said.

He added that the pensions law is focused on people who receive monthly incomes, while those in the informal sector usually earn either daily, seasonal or have irregular streams of incomes and thus are not necessarily able to contribute monthly.

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The law, he said, will have to be reviewed to take into consideration the peculiar needs of the informal sector, which has a larger population than the formal sector.

Commenting on the event, Director and Co-Founder of the Financial Inclusion Forum Africa, Frederick Asumanu said: “We as a forum want to interrogate the policies around pensions. We want to bring education, openness and transparency into the space of pensions so it becomes clear for everyone”.

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