Challenges Affecting the Implementation of Informal Sector Pension Scheme in Ghana: The Case of Ga East Municipality

Abstract

This qualitative study, which was carried out in Ga East Municipal Area (GEMA) of the Greater Accra Region, sought to provide insight into essential issues underlying barriers to the implementation of the new three-tier pension scheme in the informal sector in Ghana. Focus Group Discussions (FGDs) and in-depth interviews with informal sector workers and officials of authorised pension service providers were used to gather data for the study. Analyses of the data, using the Contextual Interaction Theory, revealed that there is low motivation among pension fund institutions to extend their services to the informal sector as a result of (1) limited economic incentive, (2) lack of understanding of the savings culture among informal sector workers and (3) the voluntary nature of informal sector pensions. On the other hand, informal sector clients are not enthused about participating in the new scheme because it does not offer convenient means of savings, access to loans and other short-term benefits that naturally motivate them to save. That aside, people’s confidence in the scheme is low because they are not adequately informed about it. To address these challenges, the study recommends the enactment of a separate regulatory framework for the management and administration of informal sector pensions in Ghana. This will create room for the pension regulator to make necessary changes that will provide some form of incentive or motivation to pension fund trustees to show keen interest in informal sector pensions. Additionally, it is recommended that service providers deploy cutting-edge technologies in delivering products and services that suit the peculiar needs, income levels and savings pattern of informal sector clients. These efforts should be backed by a strong commitment to intensify public education on pensions to help boost people’s knowledge and confidence in the system.