…as growth in contribution drops
The growth in Ghana’s pension population over the past 12 years has continues to outstrip the growth rate of contributors – thereby becoming a threat to sustainability of the Social Security and National Insurance Trust, data from the Africa Centre for Retirement Research (ACRR) has shown.
Currently, the number of workers contributing to support a pensioner, which is the dependency ratio, dropped further from 9 contributors per pensioner in 2013 to 7 in 2020. The pensioner population growth rate continues to exceed the corresponding growth rate of contributors, which is about 20 percent and 13 percent respectively.
This, according to the Executive Director for Africa Centre for Retirement Research (ACRR) Abdallah Mashud, is impacting negatively on the national pension scheme’s sustainability.
“Generally, the level of fund reserves measures the scheme’s ability to pay benefits to current and future beneficiaries. The rate of growth in the reserve generally follows the development of income and expenditure patterns,” the Executive Director said.
There has been increased retirement rates across all ages from 55 to 60 – mainly reflecting the rapidly aging population and declining fertility rate phenomena.
The 2017 actuarial valuation report projects that the dependency ratio will reduce to 2.9 people by 2067. Effectively, the ratio’s long-term trend illustrates the effect of an aging population on the cost of pensions which have to be supported by the working-age population.
Based on income-expenditure dynamics among other considerations for the period 2018 to 2020, there is an expected impact on reserves of the Social Security and National Insurance Trust, given that the depletion date for the next valuation may come earlier than 2037.
The Actuarial report projected that starting in 2032, total income (contributions, investment income and other income) will no longer be sufficient to pay for annual expenditures as the reserve starts to decrease.
“ACRR is however of the opinion that – considering the SSNIT pensioners’ post-retirement mortality pattern, increasing retirement age by two years will result in more members dying in service (instead of on a pension),” he said.
“Given the generosity of the survivors benefit formula, this policy option might offer little help in relieving pension payment pressure unless the survivors’ benefit formula is adjusted,” he said.
The data point out that old-age and total dependency ratios from the 2010 and 2020 censuses also illustrate the aging process.
The old-age dependency ratio – defined here as the number of people aged 15 to 59 divided by the number of people aged 60 and over – shows that in 2010 there were approximately 8.25 people in the working-age group for each person over the age of 60. This ratio decreased from 8.25 in 2010 to 7.72 in 2015. The ratio is predicted to decrease further with the 2020 population and housing census results.
“The actuarial report analysed the impact of increasing the retirement age from 60 to 62 over a 12-year period starting from 2025 to 2037. The report further indicated that increasing the retirement age should have an important positive impact on the scheme’s financial sustainability,” Mr. Mashud said.
