Low Pension Coverage and Participation Persist- A Retirement Survey Findings Analysis.

On the 10th of March, 2024, an invitation was extended to me by a friend to speak on understanding social security and SSNIT at their women’s fellowship. After considering the invitation based on my itinerary, I considered teaching about the Basic National Social Security Scheme(BNSSS) results and why they need a personal pension plan. After teaching and answering their questions my curiosity led me to conduct a survey which I extended to other WhatsApp groups. The findings from the WhatsApp groups confirmed the various findings of some research I have cited. the conclusive assertion is the low pension coverage and participation persist and something must be done. At the end of this article, I share what can be done by employees, employers, policymakers, and all stakeholders. I will take you through some different perspectives on retirement and touch briefly on the pension scheme system in Ghana, share some prevailing findings on the low pension coverage, and of course end with recommendations.

Defining Retirement?

Retirement is a significant life transition that typically marks the end of an individual's professional career, often accompanied by the receipt of pension benefits or other forms of income support. This period generally begins when an individual chooses to leave the workforce, often around the age of 60 or 65, depending on country-specific regulations and personal circumstances.

Definitions From Different Perspectives

1. The term "retirement" refers to the time in a person's life when they no longer work, generally as a result of attaining a certain age, building up money, or getting pension payments. Retirement is defined as "the withdrawal from one's position or occupation or from active working life" by Gendron and Barrett (2009) (p. 101).
2. From a psychological perspective, retirement represents a substantial shift in one's identity and way of life in addition to being an economic event. It entails reorganizing one's social responsibilities and connections as well as adjusting to new routines (Wang & Shi, 2014).
3. Economically, retirement is a stage of life when people depend on savings, pensions, and social security. Socially, it often means a change from a life centered on work to one centered around hobbies, family, and leisure (Beehr, 2014).
4. Experiences with retirement might range greatly between various socioeconomic and cultural circumstances. Certain cultures may not have a clear definition of retirement or may require one to continue working in the family or community in some way (Hof?cker & Radl, 2016).

These perspectives highlight that retirement is a multifaceted concept involving economic, psychological, and social dimensions, influenced by individual circumstances and broader societal factors.

The Basic National Pension Scheme in Ghana

A contributory three-tier pension scheme and the creation of the National Pensions Regulatory Authority (NPRA) to supervise the management and administration of the pension schemes are provided for by Act 2008?Act 766. The basic National Social Security Scheme, often known as the First Tier of a contributory three-tier scheme?system, is administered by SSNIT by the Act. The National Pensions System's additional tiers are as follows:

a. Tier 2: A mandatory occupational scheme that is privately managed and fully paid.

b. Tier 3: A fully funded, private-managed provident fund and a personal pension plan that is optional. (SSNIT, 2024)

Contribution Framework under the 3-Tier Scheme

All workers or the 1.8 million active contributors are by law mandated to contribute 13.5% of their basic salary by their employer to Tier 1 managed by SSNIT. Out of the 13.5%, 2.5% goes to NHIA to cater for health insurance for all employees. effectively the trust, that is SSNIT gets to manage 11%. Secondly, 5% of employees’ basic salary of these employees are contributed to Tier 2 which is privately managed by three private financial services firms namely corporate trustee, fund manager, and custodians. Lastly, employees can contribute up to 16.5% of their basic salary to the voluntary tier 3 scheme. Per experience, tier 3 is a cash cow and I recommend everyone to take advantage of it but make sure to consult a licensed financial advisor. It is important to note that the national pension scheme is exempted from taxes. This means contributing to this scheme reduces your tax obligations.?

Existing Statistics on Retirement

A. Retirement and pension coverage in Africa remains low, with a significant portion of the working population not covered by formal pension schemes. According to the International Labour Organization (ILO), only about 10% of the labor force in sub-Saharan Africa is covered by any form of social security, including pensions (ILO, 2017).

B. A vast majority of workers in Africa are employed in the informal sector, which typically lacks pension coverage. For instance, a study by the World Bank found that over 80% of the labor force in Sub-Saharan Africa works informally, leading to a significant portion of the population being excluded from formal pension schemes (Robalino & Lee, 2017).

C. Pension coverage is also uneven between urban and rural areas. Rural workers are particularly disadvantaged, with significantly lower rates of pension scheme enrollment compared to their urban counterparts. Research by HelpAge International revealed that rural populations have limited access to formal pension systems, exacerbating the vulnerability of older adults in these areas (HelpAge International, 2019).

Retirement Survey Findings Report.

This report provides an analysis of the findings from a retirement survey conducted on eight (8) different WhatsApp platforms. The survey aimed to assess whether participants have a personal retirement plan aside from the contributions made to Tier 1 and Tier 2 on their behalf by their employer.

Survey Question:

"Aside from the contributions made to Tier 1 & 2 on your behalf by your employer, do you have a personal retirement plan?"

The survey responses are categorized into five distinct groups:

1. Yes: Participants who have a personal retirement plan.

2. No: Participants who do not have a personal retirement plan.

3. Thinking about it: Participants who do not have but are considering starting a personal retirement plan.

4. Never thought about it: Participants who do not have and never considered starting a personal retirement plan.

5. I'm okay with Tier 1 & 2: Participants who do not have but are satisfied with their current Tier 1 and Tier 2 retirement plans.

Data Summary:

Yes: 84 respondents

No: 104 respondents

Thinking about it: 70 respondents

Never thought about it: 14 respondents

I'm okay with Tier 1 & 2: 10 respondents

Analysis:

Among the participants, 84 individuals (29.79%) have a personal retirement plan, reflecting a moderate level of proactive financial planning beyond employer contributions. Conversely, 104 participants (36.88%) do not have a personal retirement plan, representing the largest segment and highlighting a significant need for increased awareness and encouragement towards personal retirement planning.?

Meanwhile, 70 participants (24.82%) are currently contemplating starting a personal retirement plan, indicating awareness but a lack of commitment to action. This group could benefit from targeted information and resources to support their planning process. Additionally, 14 participants (4.96%) have never considered starting a personal retirement plan, suggesting a need for basic education on the importance of personal retirement planning and the risks of relying solely on employer contributions. Lastly, 10 participants (3.55%) are satisfied with their existing Tier 1 and Tier 2 plans, representing a minority who believe their current retirement structures are adequate, possibly due to a lack of awareness of additional benefits or alternatives.

What Stakeholders Should Consider- Recommendations:

Stakeholders should consider developing and disseminating educational materials that emphasize the importance of personal retirement planning, tailored to different stages of planning awareness among participants with the help of a financial planner.? Additionally, organizing workshops to offer hands-on guidance on creating and managing personal retirement plans is particularly beneficial for those who have not yet started a plan or are considering it. This type of workshop should be done more often and early enough. Workers should not be engaged in financial planning workshops when they are close to retirement because the impact is very minimal.

Also, stakeholders must encourage participants to seek personalized financial advice that can further help them understand their options and create robust retirement plans. Moreover, leveraging WhatsApp and other social media platforms to share success stories, planning tips, and regular reminders about the benefits of personal retirement planning can enhance communication and engagement.

The survey indicates varied levels of awareness and action regarding personal retirement planning among participants. While a notable percentage have not started planning, a significant portion is considering it. Targeted educational and advisory interventions can help bridge the gap and encourage more individuals to take active steps toward securing their financial future.

Prepared by: Benjamin Nathan Otchere, FPWMP

References

1. SSNIT (2024). About us. Ssnit.org.gh. Retrieved June 21, 2024, from https://www.ssnit.org.gh/about-us/
2. International Labour Organization. (2017). World Social Protection Report 2017-19: Universal social protection to achieve the Sustainable Development Goals. International Labour Office. Retrieved from [https://www.ilo.org/global/research/global-reports/world-social-protection-report/2017-19/lang--en/index.htm](https://www.ilo.org/global/research/global-reports/world-social-protection-report/2017-19/lang--en/index.htm)
3. Oduro, A. D. (2010). Formal and informal social protection in sub-Saharan Africa. In S. W. Handayani (Ed.), Enhancing Social Protection in Asia and the Pacific (pp. 189-213). Asian Development Bank. Retrieved from [https://www.adb.org/sites/default/files/publication/28551/enhancing-social-protection.pdf](https://www.adb.org/sites/default/files/publication/28551/enhancing-social-protection.pdf)
4. Fapohunda, T. M. (2013). The pension system and retirement planning in Nigeria. Mediterranean Journal of Social Sciences, 4(2), 25-34. doi:10.5901/mjss.2013.v4n2p25
5. Wangui, P. (2014). Challenges facing the pension sector in Kenya. Journal of Finance and Investment Analysis, 3(2), 101-119. Retrieved from [https://www.scienpress.com/journal_focus.asp?Main_Id=56](https://www.scienpress.com/journal_focus.asp?Main_Id=56)
6. Gendron, B., & Barrett, H. (2009). Retirement: A Transition with Implications for Identity and Well-Being. Journal of Adult Development, 16(2), 101-105. https://doi.org/10.1007/s10804-009-9060-6
7. Wang, M., & Shi, J. (2014). Psychological Research on Retirement. Annual Review of Psychology, 65, 209-233. https://doi.org/10.1146/annurev-psych-010213-115131
8. Beehr, T. A. (2014). To Retire or Not to Retire: That Is Not the Question. The Meaning of Work and Retirement. The Oxford Handbook of Retirement. https://doi.org/10.1093/oxfordhb/9780199746521.013.005
9. Hof?cker, D., & Radl, J. (2016). Retirement Transitions in Times of Institutional Change: Theoretical Concept. In Retirement Timing and Social Stratification: A Comparative Study of Labor Market Exit and Age Norms in Western Europe (pp. 1-20). Edward Elgar Publishing. https://doi.org/10.4337/9781785367281.00006
10. Robalino, D., & Lee, Y. (2017). Pensions in Africa. World Bank. Retrieved from https://openknowledge.worldbank.org/handle/10986/26406
11. HelpAge International. (2019). Ageing and Development Report: Rural-Urban Disparities in Pension Coverage. HelpAge International. Retrieved from https://www.helpage.org/resources/publications/