Pensions Authority considers retirement at 65

The National Pensions Regulatory Authority (NPRA) says it is considering advocating for 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.

It has been argued by labour experts that this is necessary because the average lifespan of people around the world, Ghana inclusive, has been rising as a result of improvements in living standards and the quality of and access to healthcare, both of which are elongating lifespans and consequently the effective working lives of employees.

However, the consideration is meeting opposition from trade unionists who assert that it is simply an effort to improve the financial standing of the state run compulsory first tier pension scheme run by Social Security and National Insurance Trust, SSNIT.

Viability

Although actuarial reports continue to confirm its financial viability this has come at the cost of its ability to invest in certain social projects that government desires financing for, but which lack the requisite commercial viability to meet SNIT’s investment yield thresholds.

A later retirement age would increase the number of years that members of the scheme make their contributions over, and at the same time would reduce the number of years that contributors would have to live off their pensions after their formal working lives have expired.

A more valid argument against the proposal under consideration is that it would worsen the already dire unemployment situation in Ghana; compulsory retirement provides spaces for promotions all the way up the organogram of an organization, ultimately creating room for new recruitment at the lowest levels, and delayed retirement would cause delays in such promotions and new recruitment accordingly.

Proponents

However, proponents of the proposal point to the number of situations where organizations – in both the public and private sectors – ask for special dispensations to delay due retirements and in some cases immediately re-hire a retiree on consultancy basis.

The Bank of Ghana, in a new report says the pensions sector continues to expand in spite of emerging vulnerabilities from weak investment outturns.

Total pension funds grew by 18 per year-on-year to GHS26.29 billion (7.5 per cent of Gross Domestic Product) as of the end of December 2019, the Central Bank said in its latest Financial Stability Review.

The strong growth was mainly driven by private pension funds, it said.

Broadly, the pensions sector exhibited strong potential for growth in the medium to long term as policy measures were targeted at increasing contributions flows, improving sustainability of the public pension fund and broadening the third-tier scheme via the inclusion of the informal sector.

Sustainability ratio

However, in the period under review, the sustainability ratio, measured as investment income to total expenditure and the fund ratio (fund size to its liabilities) of the public pension fund declined to 0.09 and 2.60 respectively.

The report explained that the consistent rise in benefit payouts from the public pension scheme amidst a stable dependency ratio (pensioners to active contributors) suggests that enforcement of mandatory contributions and optimisation of investment returns remain critical in ensuring the sustainability of the public pension fund.