Consumption During Retirement in Ghana: A Case Study of Pensioners in Accra

Abstract

SSNIT pension benefit is the primary source of retirement income among formal sector workers and most recently informal sector workers in Ghana. It is also the most comprehensive form of social security among formal sector workers and pensioners in Ghana. But the SSNIT pension benefit is mostly meager and inadequate especially in financing consumption expenditure of pensioners and their dependants. This creates a consumption-pension income disparity which this study sorts to investigate. This study investigates the consumption-income disparity and the possible reasons, the sources of retirement income and the significance of the various income sources among pensioners in Ghana using White robust standard errors of OLS and Kendall‟s coefficients of concordance (W-test). The results indicate that 82% of pensioners spend far in excess of their pension benefits and consumption expenditure exceeds pension benefits by 29% for the average pensioner. Inadequate pension or inadequate savings and certain socio-economic factors that affect consumption are the reasons identified to be responsible for the consumption-pension income disparity. The sources of retirement income apart from SSNIT pensions are income from post-retirement jobs, remittances from family and friends, rental income, personal savings/investments and provident funds. SSNIT pension benefit was identified to be the most important source of retirement income among pensioners in Ghana. Based on these findings, recommendations were made.