Fiscal policy think tank, the Institute for Fiscal Studies (IFS), has bemoaned the low numbers of people covered by pensions in the country and further revealed that the informal nature of the economy had left well over 80 per cent of Ghanaians without sustained income upon retirement.

The issue of low pensions coverage is more pronounced with women, with men in work more than twice likely to be covered by a pension scheme than their female counterparts, it said in Accra.

The institute has, therefore, called for innovative ways to help expand coverage to more Ghanaians to help cushion the retired populace.

Using data from the National Pensions and Regulatory Authority (NPRA) and the Social Security and National Insurance Trust (SSNIT), a Research Fellow at the institute, Mr Leslie Dwight Mensah said of the 12 million working population, only 12.3 per cent were currently covered by pensions.

“This implies that the other 88 per cent are uncovered and these will mostly be people who work in the informal sector,” he said at a national pensions’ dialogue on July 2 in Accra.

The data used for the presentation terminated in 2013, which Mr Mensah said was the latest reliable data available to the institute.

His presentation centered on ‘pension coverage and benefits in Ghana’ at the event organised by the IFS.

It brought together the industry regulator, NPRA, the SSNIT, experts and private sector players to deliberate on the state of pensions and how to sustain and improve it.

Informality in labour market

The research fellow at the IFS said the data further showed that while virtually all workers in the public sector were covered by pensions, those in the private sector were hardly covered, given that majority of them were engaged in informal work.

He said pension coverage in the private sector was 6.8 per cent as of 2013, revealing “the problem of high informality in the labour market” in the country.

He said the data further showed that persons living in the southern part of the country – the 11 regions down south were three times likely to receive pensions than those living in the northern part.

This, he said, also reflected “the fact that people working in the north tend to be involved in informal types of work than formal types of work and so when they reach 60 years and above, they are less likely to receive pension.”

Pension requirement

Currently, the National Pensions Act (Amendment), (2014) Act 833, makes it compulsory for all public sector workers to contribute to a pension scheme either under the SSNIT or one of the non-contributory schemes operated by the Ghana Audit Service and the Ghana Armed Forces, among other state agencies.

Under the first tier scheme, employers are mandated to contribute to the SSNIT, and to private trustees under the tier two.

The third tier, which is a voluntary scheme, is now an option for workers and/or their employers to contribute to any of the privately managed schemes as additional income towards retirement.

Although the same applies in the private sector, most employers and/or employees hardly register to make the contributions and those that do hardly honour the contributions.

Gender distribution

Shifting to gender, Mr Mensah said men in work were more than twice likely to be covered by a pension scheme than their female counterparts.
He said in 2013, while 17.1 per cent of men in work were covered by pension, only 7.8 per cent of females were covered.

“This reflects the fact that generally women turn towards informal employment than men and because the pension system finds it harder to reach the informal sector, it is less able to capture them,” he said.

On coverage of the retirement population, Mr Mensah said the data showed that of the 1.9 million people aged 60 and above in the country, only 14 per cent of them were receiving pensions as of 2018.

“The remainder will be those who have to continue to break their backs to earn an income, depend on families or on the Livelihood Empowerment Against Poverty (LEAP) transfers,” he said.