Although the informal sector employs about 80 percent of the country’s workforce, only 6 percent of those working in the sector are contributing toward their retirement.
This situation, according to Joseph Ampofo, President of the Chamber of Corporate Trustees Ghana, presents a serious threat to the country and raises concerns about elevated old age poverty.
“It is estimated that about 85 percent of the working population in the country is found in the informal sector. Out of this, only 6 percent is on one form of pension scheme or another,” he said.
Mr. Ampofo made these observations during the National Pensions Awareness Week’s third edition, organised by the National Pensions Regulatory Authority (NPRA) under the auspices of the Ministry of Employment and Labour Relations – held in Accra and themed ‘my pension, my future’.
He warned that if immediate steps are not taken to encourage more informal sector workers to contribute toward their retirement, old age poverty could reach alarming levels in the coming years… putting further strain on government’s limited resources.
Pension funds key
The Minister for Employment and Labour Relations, Ignatius Baffour Awuah, in a speech read on his behalf indicated that sectors such as financial, manufacturing, services, energy and real-estate have greatly benefitted from huge investments of pension funds; saying over the last decade the country’s economy has changed significantly, both in terms of employment and GDP growth – with pension funds playing a leading role.
He however noted that pension coverage still falls below expectations, given that of the country’s estimated 9.9 million working population, less than 2.4 million have some form of pension cover.
“This leaves about 7.5 million workers without any form of pension cover,” he added, describing the low pension coverage as worrying.
“This is worrisome, because the informal sector accounts for 77.1 percent of the total employed population. At the same time, they are the most prone to shocks; therefore, without the coverage of pensions their plight becomes even more exacerbated,” he noted.
While assuring of efforts to leverage technology in streamlining pension processes, ensuring that enrolment onto the three-tier pension scheme becomes seamless, he encouraged working Ghanaians, regardless of the sector in which they operate, to embrace pensions without being compelled.
Board Chair-NPRA, Paul Simon Koranteng, on his part indicated that his outfit has approved the use of a risk-based supervision system to provide a structured approach, focusing on identifying potential risk faced by the pension funds and putting in financial and operational measures to mitigate those risks in all three tier-schemes.
He revealed that as of beginning of this month, the nation’s total pension assets under management stood at about GH¢50billion.
“This an important part of the country’s financial system, and ought to be regulated effectively through its collection and investment,” he said.
National Pensions Awareness Week
The event aims to raise awareness about the 3-tier pension scheme, the relevance of pensions and retirement planning, to ensure retirement income security for Ghanaian workers while drawing together major stakeholders in the pension industry – including service providers, trade unions, government officials, opinion leaders as well as the public, among others, to deliberate on its issues and how to improve its coverage – particularly in the informal sector economy.
