Provident Funds Pension Programs in English-Speaking Sub- Saharan Africa: A Look in the Rear Mirror and Lessons for the Future

Abstract

Pension reform has been on the social policy agenda in many countries throughout the world since the mid-1980s. The main debate has been whether to transform existing defined benefit pay-as-you-go (PAYG) social insurance programs into private pension plans based on defined contributions or maintains them. While many countries throughout the world especially those in Latin America and Central and Eastern Europe have opted for private pensions involving the partial or full replacement of pay-as-you-go (PAYG) state pensions by systems of privately managed individual retirement accounts, pension reforms in English-speaking Sub-Saharan Africa (SSA) countries have focused on converting post-independence defined contributions schemes known as provident funds into defined benefit PAYG social insurance schemes particularly from the 1990s. This paper analyzes the previous experience of English-speaking SSA countries with provident funds and show that pension plans that are designed on the principles of defined contribution are evidently venerable to several socio-economic and political factors especially in the context of developing countries. The paper provides useful lessons for countries like Ghana and Nigeria that have recently re-introduce defined contribution pension plans