The National Pensions Regulatory Authority (NPRA) says it is considering advocating an increase in the retirement age in Ghana from 60 to 65, in line with trends in many other countries that have increased the mandatory retirement age.
Labour experts have argued that this is necessary because the average lifespan of people around the world, Ghana inclusive, has been rising because of improvements in living standards as well as quality of and access to health care. Both factors are prolonging lifespans and, consequently, the effective working lives of employees.
However, the proposal faces opposition from trade unionists, who assert that it is merely an effort to improve the financial standing of the state-run, compulsory, first-tier pension scheme run by the Social Security and National Insurance Trust (SSNIT).
Financially viable
Although actuarial reports continue to confirm the financial viability of the idea, this has come at the cost of SSNIT’s ability to invest in certain social projects that the government wants financing for, but which lack the requisite commercial viability to meet the Trust’s investment yield thresholds.
A later retirement age would increase the number of years over which members of the scheme make contributions, and at the same time would reduce the number of years that contributors will have to live off their pensions after their formal working lives have expired.
A more valid argument against the proposal of extending the retirement age to 65 is that it would make an already bad unemployment situation in Ghana worse.
Compulsory retirement makes space for promotion all the way up the organogram of an organisation, ultimately creating room for recruitment at the lowest levels. Delayed retirement would cause delays in such promotions and new recruitment accordingly.
In favour of the proposal
However, proponents of the proposal point to the number of situations in which organisations – in both the public and private sectors – ask for a special dispensation to delay retirement payments due and then, in some cases, immediately rehire the retired person as a consultant.
The Bank of Ghana (BoG) says the pensions sector continues to expand despite emerging vulnerabilities from weak investment outturns.
Total pension funds grew by 18% year-on-year to GHC26.29 billion (7.5% of gross domestic product) as of the end of December 2019, the BoG said in its latest Financial Stability Review. The strong growth was driven mainly by private pension funds, the Bank said.
Sustainability?
Broadly, the pensions sector exhibited strong potential for growth in the medium to long term as policy measures were targeted at increasing contribution flows, improving the sustainability of the public pension fund and broadening the third-tier scheme by including the informal sector.
However, in the period under review, the sustainability ratio of the public pension fund, measured as investment income to total expenditure, declined to 0.09. The fund ratio (fund size to liabilities) declined to 2.60.
The report explained that the consistent rise in benefit payouts from the public pension scheme amid a stable dependency ratio (pensioners to active contributors) suggests that the enforcement of mandatory contributions and optimisation of investment returns remain critical to ensuring the sustainability of the public pension fund.
* Asaase Radio 99.5 – tune in or log on to broadcasts online.
Follow us on Twitter : @asaaseradio995
#asaaseradio #TVOL
