Trustees in the pensions sector are not doing enough to enrol workers in the informal sector, even as data show that the informal sector employs 85 per cent of the country’s workforce, according to Ernest Amartey Vondee, Director of Research & Planning at the National Pensions Regulatory Authority (NPRA).
“The trustees can do better,” he said, adding that the regulator must introduce new policies to incentivise the workforce in the informal sector to see the need for planning toward pensions.
“Much more needs to be done, because in excess of 85 per cent of the workforce in this country are in the informal sector. We need to do better, but with some kind of encouragement from the regulator,” he added.
Speaking after a pensions forum organised by Axis Pension Trust in Accra, Mr Vondee conceded that informal sector coverage is a challenging field, because it comes with much more cost in order to extend coverage – but stressed that there is a way out.
“It is possible a change in policy could help because if you look at the National Pensions Act, the attraction is more about giving them tax rebates; but people in the informal sector, I am sure, are not attracted by tax rebates. In some countries, what they have done is for government to match your contribution. If you contribute GH¢10, then the government matches it with something.
“We can look at the options available worldwide and see what best we can do to get the informal sector roped-in. The NPRA receives some contributions from pension schemes in relation to the assets under management; but if you run an informal sector scheme, particularly the personal pension scheme, we waive the contribution that scheme must make to the regulator.
“This is a way of encouraging the pension companies to spend more on attracting more people. We have done that. The other thing we have done is carry out extensive public education in markets and others,” he added.
Statistics from the NPRA show that funds under the management of private pension funds have now outgrown funds under management of the Social Security and National Insurance Trust (SSNIT). While SSNIT’s assets stood at GH¢9.2billion in 2018, funds under private players stood at GH¢13billion in 2018 – up from the previous year’s GH¢11billion.
Despite the significant growth recorded by the private players over the years, a large chunk of private-sector workers – particularly those in the informal sector – do not contribute toward their retirement.
Only one per cent of informal sector workers is enrolled on any form of pension scheme, even as the NPRA’s own data show that about 85 per cent of the country’s workforce are found in the informal sector. This means that most of those workers have to rely on the benevolence of family and friends to survive when they are no longer in active service
A report by the Institute of Fiscal Studies (IFS), titled ‘Pensions Coverage and Benefits in Ghana’, also revealed that only a handful of people in retirement – i.e. age 60 and above, receive pension pay monthly; confirmation that a large chunk of them worked in the informal sector during their active service.
According to the policy think-tank, of 1.9 million people in the retirement age bracket, only about 270,000 – representing just 14 per cent – are enrolled on pensions.
Again, the report adds that there is a sharp gender disparity between men and women in retirement. Men aged 60 and above are three times more likely to receive a pension than women of the same age – indicating that a lot more women are found in the informal sector than men, as few people in the informal sector have pension schemes.
Furthermore, compared to the northern part of Ghana, people living in the south of Ghana are about twice as likely to be receiving a pension – again implying that the northern part of the country leans more toward informal jobs than those in the south.
A Research Fellow of the IFS, Leslie Dwight Mensah, said there is a need for the National Pensions Regulatory Authority (NPRA) to understand the informal sector very well and come out with an approach that serves their need in order to encourage workers therein to contribute to pensions.
“For example, about 40 per cent of people in the informal sector are found in farming. These things must be understood by the regulator and the industry. Once these things have been understood, they need to be educated so that they can become aware of the need to save toward their retirement,” he told the B&FT.
Again, he recommended that the NPRA and industry players must come out with practical and tailored guidelines for the informal sector, taking into consideration their unique characteristics.