Reimagining Investments: What if the E-Levy is Transformed Into a Savings Scheme for Personal and National Development?
- The Electronic Levy (E-Levy) has been a contentious fiscal policy in Ghana, eliciting widespread public opposition. While the new NDC government has proposed its cancellation, the opportunity exists to either reduce the rate or maintain it and transform this revenue stream into a long-term, sustainable financial safety net that directly benefits Ghanaians. This can be achieved by repurposing the E-Levy into a National Savings Scheme for financial empowerment—a move that would not only address low pension coverage but also empower millions to invest voluntarily for their future.
- The National Democratic Congress (NDC), in its manifesto, has outlined ambitious economic turnaround strategies centred on a 24-hour economy programme. This programme prioritises economic growth, enhanced productivity, and a substantial $10bn public infrastructure investment plan. The critical challenge remains how to effectively mobilise resources required to actualise the reset agenda without disrupting the IMF framework for 2025 to 2028.
- Historically, Ghana has leaned heavily on fiscal and monetary policies to spur economic growth or curb inflation. However, due to the country’s structural vulnerabilities, inflation has persistently taken centre stage, overshadowing growth. This approach has resulted in overburdened citizens and a corporate sector plagued by high taxes, elevated interest rates, and suppressed earnings.
- Ghana’s domestic financial market is too small to meet the dual demands of government budgets and private-sector financing, thus resulting in the government effectively crowding out the private sector and driving up the cost of credit. To address the shortfall, successive administrations have turned to international markets, which has further introduced significant financial vulnerabilities that undermine public financial stability for the country.
- With the corporate sector struggling and government grappling with a high debt burden, the most viable avenue for boosting domestic capital mobilisation lies in innovatively leveraging household savings, supported by robust and comprehensive national pension programmes. Ghana’s pension fund coverage and assets remain low. Out of a 13-million-strong labour force, only two million workers contribute to pensions. As a result, total pension fund assets stand at just $4.3 billion—significantly lagging behind Botswana ($9 billion), Kenya ($12.8 billion), Nigeria ($28 billion), and South Africa ($213 billion). This low coverage limits Ghana’s ability to leverage pension funds as a tool for national savings and economic development, in stark contrast to high-income countries that successfully utilise pension schemes to bolster financial stability.
- On a broader scale, Ghana’s pension system is meant to mobilise long-term capital for economic growth, but its impact remains limited due to poor investment strategies. The country’s pension funds suffer from limited investment diversification, with an overwhelming 89% allocated to government treasuries in 2021—far higher than in the UK (41%), the US (18%), and the Netherlands (43%), where corporate bonds form a key part of pension portfolios. Even in Botswana, South Africa, and Kenya, pension funds allocate only 17%, 10%, and 46%, respectively, to government securities. To maximise the potential of pension funds to support the reset agenda, Ghana must implement the necessary policy reforms to expand coverage to all working Ghanaians and adopt a more efficient asset allocation strategy that preserves the long-term purchasing power of pension fund assets.
- Ghana stands at the crossroads, where rebuilding household savings and national pension assets which have been decimated by protracted inflation, the domestic debt exchange programme, and financial sector clean-up has become urgent. With rising life expectancy, an expanding informal sector without pensions, and an ailing social security system, the country risks a social and economic crisis if no bold action is taken. Too many Ghanaians in the informal sector enter retirement with insufficient savings and end up relying on an extended family system that is steadily weakening. Current pension schemes—already ruined by inflation—cover too few people and offer inadequate benefits. It is time to secure the future of Ghanaians by fostering a national savings culture through a universal auto pension system, that not only empowers individuals to build wealth but also creates a vital pool of capital to finance the 24-hour economic agenda.
- Opportunity for a Paradigm Shift – The Ghana Universal Pension (4TH TIER)Rationale of the Policy
The essence of this policy is simple: Instead of discarding the E-Levy, which already generates significant revenue, Ghana can redirect it into a universal pension scheme that benefits every citizen. This approach has a dual advantage: it creates an inclusive pension framework with full coverage for adult Ghanaians while providing immediate social relief through targeted grants for the aged. In a country where large segments of the working population are financially vulnerable, especially the informal sector workers and low-income households, a national savings and auto-pension system offers a dignified solution to long-term old-age poverty.
- Scheme Design
The proposed Ghana Universal Pension (GUP—Tier 4) will serve as a national pension programme to address Ghana’s low savings rate. Aligned with standard personal pension structures, the GUP will feature two sub-accounts: a Retirement Sub-account and a Savings Sub-account. Contributions from the e-levy will be directed exclusively into the Retirement Sub-account, with a minimum holding period of 10 years, except for individuals above 55. The Savings Sub-account will accept voluntary contributions from members or third parties (family and friends) and will have a minimum investment period of five years, except for those over 55. Withdrawals will be processed via a mobile app or USSD within seven working days. To safeguard long-term savings, individuals below 55 can withdraw only twice a year after the minimum holding period, while those 55 and older may access funds anytime. Additionally, contributors aged 55 and above, or those medically incapacitated, will have the option to convert their benefits into a steady stream of monthly or quarterly payments.
- Investment of Funds
Aside from government securities, the guidelines for investment of pension funds formulated by the National Pensions Regulatory Authority (NPRA) permit pension funds to invest in corporate bonds, equity, fixed deposits, commercial paper, and notes, as well as in alternative asset classes such as real estate, private equity, and offshore assets. Due to its strategic growth intent, the investment policy of the fund will allow for exposure to financially viable projects that are economically targeted to deliver positive real returns. This will allow pension funds to channel resources to critical sectors such as cocoa purchases, commercial agriculture, agro-processing, etc., through the issuance of credit-rated debt securities or equity. The role of the private equity industry in helping identify winners and building the capacity of entrepreneurs in economically targeted sectors will be critical to resetting Ghana’s private sector as an engine of growth and wealth creation.
- Economic impact of the policy
The economic impact of this proposal cannot be overstated. With projected annual contributions (from E-levy revenue) exceeding GHS 2.4 billion (for 2025), Ghana stands to accumulate over GHS 170 billion in pension assets (national savings) in 15 years from the e-levy contributions alone. With additional voluntary contributions, the pace of capital accumulation will be unprecedented in the history of Ghana. Assuming voluntary contributions adding two times the pension contributions from the E-Levy, Ghana stands to accumulate over GHS20billion in 3 years and approximately GHS520b in 15 years. In addition to driving new investments in strategic growth sectors, the mobilised funds could be utilised to finance annual cocoa purchases, reducing reliance on costly external borrowings. They could also provide critical liquidity to avert the looming risk of sovereign debt defaults on maturing restructured domestic bonds in 2027/28.
- Management of the Scheme
The scheme will require prudent management by a joint venture established under a public-private partnership to ensure transparency, accountability, and efficient asset allocation. Aside from the joint venture company, other key partners needed for the project’s success include other financial institutions such as banks, fund managers, and fintechs, ensuring professional fund management and public trust. Moreover, the scheme’s investments in financially viable national infrastructure and private sector projects that are aligned with the 24-hour initiatives will spur job creation, enhance economic productivity, and reduce the country’s reliance on external borrowing. To avoid conflicts of interest, the scheme will allocate capital to private equity funds for onward investment, including in national economic priority projects.
- Fostering Public Trust
To further enhance public trust and participation, the scheme will prioritise transparency through digital platforms, allowing every contributor to track their savings and benefits in real-time on their preferred financial services platforms. The management of the scheme will be overseen by a trusted corporate trustee company jointly owned by the government and the private sector and an independent board of trustees comprising government officials, labour representatives, and private-sector experts (corporate trustee company). Involving key stakeholders will guarantee efficient management and fair dealing. It is important that an experienced indigenous pension manager with a proven track record in Ghana and internationally with robust infrastructure and operational expertise be chosen as a technical partner to help establish and manage GUP, to ensure the scheme’s success from inception.
- This policy represents a visionary shift in how national revenues are utilised—transforming what was once a divisive tax into a catalyst for national savings mobilisation. The conversion of the E-Levy into GUP is more than a financial policy; it is a social contract with the people of Ghana, a promise that their savings will build not only their personal wealth but also a stronger and more resilient nation. This initiative will unlock the untapped potential of the economy, create a new pool of funds for financing long-term development, and foster not just growth but also shared prosperity for all Ghanaians.
- This idea has been discussed extensively with Axis Pensions, whose professional insights have significantly shaped the idea.In the next edition of “Reimagining Investments: Life Beyond Ghana’s Debt Exchange Programme” we shall focus on SETfund, a solution that puts power back in the hands of the people by pooling resources from farmers, traders, unions, and community groups. Contributors not only retain equity ownership but also earn guaranteed returns. This is more than an investment opportunity—it’s a movement driving enterprise growth, creating wealth, and empowering local communities. Agriculture, manufacturing, and other key sectors stand to benefit, all while ensuring the public sector regulates transparency and the private sector drives operations.
