The Africa Centre for Retirement Research (ACRR) is pushing for the minimum pension of retirees on the national pension scheme to be increased after remaining flat at GH¢300 for the past three years.
According to the ACRR Post-Retirement Income Survey in October 2020, the pandemic has caused increased in-hospital visitations among pensioners – resulting in increased cost of healthcare.
Sustaining the economic welfare of pensioners, Executive Director of the Africa Centre for Retirement Research, Abdallah Mashud, in an interview with B&FT said the proposed minimum pension – which has stayed at GH¢300 since 2018 – needs to be reviewed upward in 2022 to reflect the actual cost of living. This, the report said, will also close the growing economic gap between new and old retirees.
“The increased medical costs to pensioners during the era of pandemic, due to increased hospital visitation, has forced a significant disparity between the real value of pension pay-outs and pace of inflation,” he said.
The ACRR has further projected an at-least fixed rate of 9 percent as the increment for every pensioner – pension indexation – who existed on the payroll as of December 2021, given the trend of inflation lately.
“The cost-of-living adjustment to pensions for 2022, which will be based on the year-end average consumer price index, will likely see the Trust apply, at least, a fixed rate of nine percent as increment for every pensioner who existed on the payroll as at December 2021,” he said.
Following a slowdown in consumer inflation to 7.5 percent in May 2021 from 10.3 percent in February 2021, there has been a consistent rise in consumer inflation to the current level of 12.2 percent in November 2021; and this is projected to remain high due to global and domestic factors: such as high fuel prices, increasing transport cost, a weak cedi and rising food inflation.
The yearly adjustment’s objective is to keep retirees’ buying power constant by applying an inflation-adjusted index to pensions in payment.
The Executive Director further highlighted the COVID-19 pandemic’s impact on the income of retirees, with over 8 out of 10 retirees in Ghana being estimated to rely on social security pay-outs as their main source of livelihood; and on average, each retiree has six persons who economically depend on him/her for their living.
Given the solvency challenges facing the SSNIT scheme, he suggested that the mode of Pension Indexation can be improved to fully reflect the solidarity and risk-pooling principles on which social security thrives.
“The Scheme’s current basis of reviewing pensions needs to be looked at, especially in the face of solvency challenges the scheme is facing,” he said.
Pension indexation is a policy for upward review of pensions in payment, as a means of preserving the purchasing power of pensioners by annually adjusting monthly pension benefits in line with an index of consumer prices; or changes in average earnings of active contributors; or a combination of both.