While Ghana’s pension industry recorded around GH¢78.2billion as of June 2024, with the majority of funds allocated to domestic assets including government securities and Eurobonds, local pension fund assets under management (AUM) are expected to reach GH¢100billion by the end of 2025.
This will be significantly ahead of earlier projections, according to David Tetteh-Amey Abbey, Deputy Chief Executive Officer-National Pensions Regulatory Authority (NPRA).
Mr. Abbey observed that the industry had initially targetted GH¢100billion by 2026, but is now set to reach that milestone a year earlier.
However, concentration of pension funds in sovereign debt remains a key risk for the sector – particularly in the wake of the Domestic Debt Exchange Programme (DDEP), which restructured GH¢31billion of pension holdings.
Mr. Abbey acknowledged this by adding: “We all know that during the DDEP we saw 85 percent of pension funds were in government securities and a similar number of collective investment schemes are in government securities – so when government coughed, we all caught a cold”.
NPRA’s guidelines allocate the highest portion (75 percent) to Government of Ghana Securities – including Treasury bills, notes and bonds – while Corporate Debt Securities and Bank Securities each receive 35 percent allocations.
Local Government Securities and Alternative Investments are capped at 25 percent, Listed Shares at 20 percent and Collective Investment Schemes at 15 percent.
However, pension fund managers remain cautious about venturing into unfamiliar asset classes, particularly given the strict fiduciary responsibilities attached to managing retirement savings.
The lack of investment vehicles that meet the strict regulatory and risk thresholds as well as the slow bond market has resulted in higher subscription rates for Treasury bills, as pension funds seek safety in short-term government instruments.
Therefore, private pension fund managers in 2024 pushed for increasing the threshold for offshore investments beyond the current five percent ceiling, as they sought safety in higher-yielding foreign assets and currency diversification opportunities.
However, the regulator pushed back – ostensibly to protect the cedi.
Chief Executive Officer (CEO) of Sarpong Capital, Kofi Kodua Sarpong, has also called for a regulatory reassessment to allow pension funds access more transparent international markets, hedge against local economic risks and enhance returns.
Despite regulatory constraints, the pension fund industry is seeing a modest shift – with new investment instruments such as green bonds, asset-backed securities and real estate investment trusts (REITs) gaining traction.
