Pension assets reach record high of GHS 49.5bn driven by increased contributions, strong regulatory measures
Ghana’s pension assets have surged to a new all-time high, reaching GH¢49.59 billion at the end of the first quarter of this year, according to data from the National Pensions Regulatory Authority (NPRA). The figure represents a notable 6.42 percent growth from GH¢46.6 billion at the close of 2022, highlighting the resilience of the country’s pension system despite ongoing economic challenges.
The impressive growth in pension assets can be attributed to several key factors, including a rise in the number of contributors and improved pension literacy. Furthermore, the successful enforcement of the mandatory Tier 2 scheme has played a crucial role in boosting the confidence of Ghanaians in securing their financial future through retirement planning.
Nana Sifa Twum, Manager-Corporate Affairs at the NPRA, expressed delight at the increasing awareness among individuals regarding the importance of retirement planning, emphasizing the steady growth as a testament to their confidence in the pension system. This positive sentiment reflects a broader trend of active participation among Ghanaians in securing their financial well-being.
A closer examination of the distribution of assets reveals that the mandatory Tier 1 and Tier 2 schemes hold a significant majority, accounting for approximately 81 percent of the total assets under management. Conversely, the voluntary Tier 3 scheme represents the remaining 19 percent share. This distribution underscores the enduring significance of mandatory schemes in Ghana’s pension landscape.
Despite the remarkable growth, challenges loom on the horizon that could potentially impact the future expansion of assets under management. Notably, the non-payment of expected coupons led to a GH¢937 million impairment of assets by the end of 2022, creating a strain on available funds as they must be allocated to meet benefit obligations.
In response to these challenges, the NPRA is considering a review of investment guidelines to allow investments in other sectors of the economy, which could diversify risk and potentially boost returns. Additionally, pension funds have increased their net position in equities on the Ghana Stock Exchange, contributing 16 percent to trading activity between January and May 2023, compared to the four percent recorded during the same period in 2022.
To ensure sustained growth and stability, the NPRA is contemplating a series of regulatory tools and policy recommendations for the future. Measures under consideration include addressing liquidity issues, enhancing stakeholder engagements, standardizing accounting treatment, and exploring avenues to reduce drawdowns on Provident Fund withdrawals after ten years.
The NPRA is actively collaborating with the Ministry of Finance to tackle liquidity concerns and secure the long-term sustainability of the pension sector. The focus is on promoting targeted stakeholder engagements, standardizing accounting practices, and exploring innovative strategies to optimize investment opportunities. Furthermore, the NPRA intends to encourage greater participation in voluntary schemes and provide flexibility and efficiency to pension fund managers through waivers on investment guidelines and reviews of custody account cash balance turnaround time.
In a bid to mitigate inflation risk and safeguard the purchasing power of pension funds, the NPRA aims to promote investment hedging, thereby ensuring the long-term financial security of pensioners.
As Ghana’s pension assets continue to grow and the pension system evolves, the NPRA’s proactive approach and comprehensive measures will be instrumental in maintaining the sector’s robustness and meeting the retirement needs of Ghanaians in the years to come.
