Editorial: Broadening pension contributions crucial to accruing investment capital


The National Pensions Regulatory Authority (NPRA) is worried that unless there is an increase in the number of active working Ghanaians contributing towards retirement, demand for public sponsored social interventions could rise in the coming years.

Government allocates around GH¢270 million to the Livelihood Empowerment Against Poverty (LEAP) programme yearly, while GH¢1.7 billion was allocated to the National Health Insurance Scheme (NHIS) in 2019.

Apart from these, programmes such as the Ghana School Feeding Programme (GSFP), the Capitation Grant and the Labour Intensive Public Works (LIPW) programme consume a significant amount of public funds.

The Authority worries that financial commitments to these programmes would increase substantially in the coming years if steps are not taken to increase pension coverage. This is highlighted by the fact that of the country’s 11 million active labour force, 7.7 million, representing 70 per cent, are non-active pension contributors.

The high number of non-pension contributors is driven by the informal sector, where only three per cent of the sector’s 7.9 million active workers are without any formal social security protection, according to data from NPRA’s 2019 report.

Consequently, the Authority warns that the situation could increase the government’s expenditure on social interventions programmes like the LEAP etc.

NPRA’s Chief Executive Officer, Hayford Atta Krufi puts it succinctly when he argues: “These people would depend on the government and benevolence of others to have their daily meal. The government would have to them put on Livelihood Empowerment Against Poverty and other social intervention programmes for support. This will increase government expenditure which could have been avoided if they had contributed to a pension scheme”!

He believes the country is losing a huge source of investment capital in the form of pension contributions that could’ve been gathered from the contributions of the informal sector workers which in turn could have been used for long term investment projects.

Mr. Atta Krufi notes that developed countries have reached where they are because they developed their pension sector such that they were able to accumulate funds for other developmental projects.

“Essentially pension funds are described as a cheap source of long-term funds that can be borrowed for long developmental projects”, he maintains.

In a country where the majority of the labour force are not on any form of pension system speaks of how bleak the future is, the NPRA’s Chief Executive Officer added.

Indeed, the NPRA has to really step up its tentacles to cover workers in the informal economy because not only is it part of their mandate but the fact that there are many in the informal economy who earn decent incomes.

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