Abstract:
World Bank report (2010) clearly reported a continuous increase in old age dependency ratio and
a sharp decline in fertility rate. The disparity of child birth between the early 1960s and the
2000s has caused many people to be found in the old age group. Now, the kind of pension
scheme operating in Ghana is the Pay as you go scheme (PAYG) and the sustainability of the
scheme depends on increasing working population. The problem is how the fewer young people
under the PAYG scheme can take care of the many old generation without breaking down the
scheme
Meanwhile, studies suggest that mandatory pension scheme increases savings but we have
recorded decreases in Ghana’s national savings though SSNIT operates the mandatory pension
scheme.
The objectives of the study are; to examine the trends in pension contributions and national
savings in Ghana, to establish the relationship between pension contributions and national
savings, and to identify the prospects and challenges in the pension industry.
The Overlapping generation model used in the study. The study employed the Ordinary Least
Squares to establish the linear relationship and the Vector Error Correction Model as the
estimation technique.
Results from the study indicated that one of the predominant challenges facing the scheme are
insufficient monthly benefit. Also from the secondary data results, interesting findings like a
percentage unit increase in financial deepening will cause a decrease in national savings and a
positive correlation between pension contribution and savings. It was suggested from the
findings that SSNIT should increase the monthly benefits of pensioners, so that consumption will
be smoothened during the days of retirement.
