Ghana is set reform its public and private sector pension systems in a bid to emulate the success of the Swiss pension model.
Under the terms of an agreement between Ghana and Switzerland, the Swiss State Secretariat for Economic Affairs (SECO) will support the African country to strengthen the regulation provided by its central pensions watchdog, the National Pensions Regulatory Authority. SECO has contracted the Switzerland-based HSP Consulting to support the implementation of the project in the next three years.
In 2008, Ghana overhauled its pensions and brought in a contributory three-pillar system, mirroring the Swiss model. This provides a basic state pension (pillar 1), a compulsory occupational pension scheme (pillar 2), and private insurance options to allow individuals to supplement their savings (pillar 3).
But, these recent reforms still have large institutional weaknesses and up to now pension funds offer no adequate income to Ghanaian retirees, HSP partner Jaap van Dam told The Actuary.
'The challenge is that there is no experience in Ghana and the staff need to be trained on how Ghanaian pension funds work. Also the regulator has no adequate software yet to register pension fund-related information,' van Dam explained.
'They have to decide what is important, what is the key information that each trustee must deliver? So all procedures that are normal for us in Switzerland and the UK have to be explored and found out and developed and implemented and introduced to the Ghanaian people.'
The pensions regulator, established in 2010, 'is young and still characterised by weak capacities, which complicates the smooth running and timely implementation of the reform,' HSP has found.
Ghana's pension reforms, which are supported by the Swiss government, are expected to tackle the weaknesses of the current system. These include: very low pillar-2 coverage, less than 10% of the 'formal' working population; inadequate investment returns; a complex and costly bureaucracy; and very low levels of knowledge about markets and financial instruments.
Looking ahead, van Dam said: 'In the next three years [we expect to see] basic functions working, with software and the IT programmes that work and no insolvencies, Ghanaian workers who have trust in their pension funds and a stable market, with no major threats to old-age savings.'
SECO is currently tendering for experts to work on the project and offer technical advice and capacity building activities to the NPRA. The tender documents are available at www.simap.ch which is the official platform for public procurements of the Swiss government. Keyword Ghana. Project Nr 108934.The tender closes on April 11.
