Inflation, concentration risk erodes pension investment returns — GSE Boss

Ms Abena Amoah, Chief Executive Officer (CEO) of Ghana Stock Exchange (GSE), says inflation and concentration risk reduce pension scheme investment returns.

She advised pension schemes not to over-concentrate on government securities, without considering other investment options, which often plunge them into significant market risk and reduced returns.

The CEO said this during the Second Annual General Meeting (AGM) of the Health Sector Occupational Pension Scheme (HSOPS) in Accra.

The AGM, themed “Safeguarding the Achievements of Tier 2 Funds: A Collaborative Duty of Stakeholders,” highlighted Tier 2 pension schemes’ contribution to investment growth.

The GSE CEO said inflation, for example, undermined the profits of pension schemes, resulting in inadequate compensation for pensioners.

She stated that due to over-concentration on government securities, including bonds, pension funds were impacted by government decisions, particularly the Domestic Debt Exchange Programmes, which lowered their returns on investment.

The CEO urged pension schemes to pursue real sector investments, ownership of Ghanaian resources such as interests in mining firms and investments in state-owned companies with strong financial performance in order to maximise returns.

She also urged the regulator to streamline regulations to allow pension schemes in Ghana to invest off-shore: in regulated African and global markets.

Miss Amoah urged pension schemes to partner with capital market players to be advised on how to increase investment returns and economic potential.

She recommended that the Tier 2 pension schemes adopt technology to double access pension products, innovate, and enhance financial literacy.

Ghana’s total private pension funds grew by 32 per cent in 2023, compared to 26 per cent recorded in 2022.

Total private pension funds under management for 2023 was GH¢46.5 billion, compared to GH¢ 35.3 billion recorded in 2022.

According to the Bank of Ghana, the sustained growth in private pension funds is attributable to better returns on investments and the prosecution of employers defaulting on Tier 2 contributions, which increased inflows.

The second AGM for HSOPS was attended by representatives of various health sector workers, including medical doctors, nurses, physician assistants, and pharmacists.

Presenting the financial report, Dr. Derek Boateng, Chairperson, Board of Trustees, said the scheme continued to record remarkable investment returns year-over-year.

He noted that for 2023, the scheme recorded a total gross investment income of GHS 832 million compared to GHS 447 million in 2022.

The Chairperson said the net investment income of GHS 830 million was also achieved during the year.

He said the achieved investment income resulted in a significant increase in the gross return from 21.7 per cent in 2022 to 39 per cent in 2023.

The AGM also featured the presentation of the five(5) strategic plans, which were presented by Mrs. Perpetual Ofori-Ampofo, a member and secretary to the board of trustees.

She said the board desired that HSOPS would continue to be a credible scheme that paid reasonable and sustainable one-time lump-sum Tier 2 benefits to members.

Members accepted the financial report of the scheme.