Pension Reforms and Retirement Income Security in Ghana: Implications for the Inclusion of the Informal Sector Under the New Pensions Act.

Abstract

This study examined pension reforms and retirement income security for Ghanaian workers. The study also considered how the three-tier pension scheme is positioned to meet the retirement needs of informal sector workers. Using a qualitative research method, the research sampled views from 83 informal sector workers from selected markets and 3 officials from the regulator, regulated and informal sector foundation using a combination of elite interviews and focus group discussions. Respondents were selected using the purposive, convenience and stratified sampling techniques. The descriptive and thematic analyses were used to draw and discuss the essential themes in relation to the research objectives. It was observed that in order to meet the retirement income security needs of Ghanaian workers, efforts have been made to enhance the system through the current pension reform. The study revealed that although the current pension system in Ghana adequately provides for the need of the informal sector, there is low patronage by informal sector workers. This is due fundamentally to lack of trust in the trustees and their longterm pension products. The study further discovered investment in the education of children, investment into business ventures, money market investment and continuous reliance on current business proceeds after retirement as a retirement packages known by informal sector workers. However, informal sector workers perceive the third-tier pension scheme as an effective way of contributing toward their future. It was also found that, in order to ensure adequacy of the threetier pension scheme, the regulatory body invest funds from contributors into a permissible venture such as treasury bills, bonds and stocks while avoiding non-permissible ventures such as investing into microfinance companies. The finding also indicates awareness creation and public education, marketing campaigns and engagement of trade unions as mechanisms used to extend pension coverage to the informal sector. Efforts have thus been made by stakeholders to educate informal sector workers but the ingrained notion of mismanagement; illiteracy and lack of knowledge on the subject pose significant setbacks to expanding coverage. To ensure efficiency in pension provision in the informal sector, it is recommended that policy makers and regulatory bodies increase the number of entities that administer the three-tier pension scheme. The study concludes that Ghana has made significant progress in informal sector pension management under the current pension reform and should the present challenges be addressed in policy and practice, the goal of income security for all workers would be achieved.