Enhancing Social Security Coverage in Ghana: Peoples Pension Trust Experience
Ghana has historically focused on social security for formal workers, leaving the informal sector underserved. Efforts since the early 2000s to bridge this gap have faced challenges. Peoples Pension Trust has been a key player in trying to extend coverage to the informal sector. Various pension schemes have evolved over the years, with Acts and amendments aimed at improving the reach and effectiveness of social security in Ghana.
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PEOPLES PENSION TRUST GHANA LIMITED EXPERIENCE Presented by: Kofi Eba-Miezah Polley (Chief Operations Officer)
SUMMARY 1. Context 2. Brief History 3. Earlier Attempts to Extend Coverage to the Informal Sector 4. Informal Sector Project 5. People s Pension Trust Experience 6. Conclusion www.peoplespensiontrust.com
1. CONTEXT (1/1) Since the colonial era, Ghana has sought to provide social security for workers However, it has been more successful for workers in the formal sector particularly workers in the civil and public service This has created an exclusivity for mainly workers in the informal sector economy Since the early 2000s a lot of efforts have been made to bridge this gap and it hasn t been as successful as expected www.peoplespensiontrust.com
2. BRIEF HISTORY OF PENSIONS SCHEMES IN GHANA (1/1) Prior to 1972 A Provident Fund Scheme administered jointly by the then Department of Pensions and the State Insurance Corporation 1972 The Trust was established under NRCD 127 to administer the National Social Security Scheme 1991 It was converted to a Social Insurance Pension Scheme, administered by SSNIT and governed by the PNDC law 247. 2010 Reformed by an Act of Parliament, Act 766 of 2008 and was implemented in January 2010 to replace all pension schemes in Ghana including Cap 30. In 2014, the National Pensions (Amendment) Act 883 was passed to amend portions of Act 766.
3. EARLIER ATTEMPTS (1/3) Pre: Pension Act 2008, Act 766 of Ghana Even though the statutory scheme (PNDC Law 247) by law mandated to provide social protection for the working population , it had been very difficult As at the end of 2002 voluntary contributors (Informal Sector) constituted 0.6 % active members Informal sector workers as of 2002 were 70.8% of the working population www.peoplespensiontrust.com
3. EARLIER ATTEMPTS (2/3) Measures Adopted between 1997 2002 Making payment of contributions more flexible: monthly, quarterly, bi-yearly yearly No penalty to be levied on late payments of contributions www.peoplespensiontrust.com
3. EARLIER ATTEMPTS (3/3) Challenges Statutory monthly contributions as a percentage of monthly salary Preferred short term financial provisions to long term Perception that benefits provided do not meet their immediate needs Mistrust for bureaucracy Mode of paying contributions www.peoplespensiontrust.com
4. THE INFORMAL SECTOR PROJECT (1/8) In 1997 the Government of Ghana, SSNIT and the Non Bank Financial Institution (NBFI) unit of the World Bank sponsored a consultancy project and was entitled Widening Social Security Coverage to the Informal Sector There were recommendations for a separate package for workers in the informal sector, to address their specific needs and characteristics www.peoplespensiontrust.com
4. THE INFORMAL SECTOR PROJECT (2/8) Findings by the Team of Experts Address their immediate needs for funds to run their businesses; Help them (Informal Sector Workers) to take care of their children s needs; and Help them (Informal Sector Workers) meet the cost of their medical needs. www.peoplespensiontrust.com
4. THE INFORMAL SECTOR PROJECT (3/8) Recommendations based on the findings: A separate package for workers in the informal sector, There should be a window of withdrawal before old age retirement A Money Purchase Scheme (essentially a defined contribution scheme) Contributions made are split into two equal portions (One part may be withdrawn while the other portion is maintained to pay accrued benefits (old age retirement, invalidity and the survivors lump sum) www.peoplespensiontrust.com
4. THE INFORMAL SECTOR PROJECT (4/8) The SSNIT formed a team in June 2002 to review the recommendations made by the World Bank team and to design the appropriate administrative structure to implement the scheme. On their fact-finding mission, the team found that, five years after the initial study by the World Bank team of consultants, the issues raised in the study were still pertinent and that workers in the informal sector were more receptive to the proposed scheme than to the existing scheme www.peoplespensiontrust.com
4. THE INFORMAL SECTOR PROJECT (5/8) Scheme Design: A voluntary scheme for: Informal sector workers; Ghanaians resident abroad; and Formal sector employees who wish to enhance their pensions. A defined contribution scheme administered in two parts: A withdrawable portion; and A non-withdrawable portion Covers the following contingencies: Old age; Invalidity (only accident); and Survivorship. www.peoplespensiontrust.com
4. THE INFORMAL SECTOR PROJECT (6/8) Contribution Collection: Members have the option to contribute daily, weekly, bi-monthly, monthly, quarterly, annually, and seasonally. Members will be issued with passbooks or receipts on payment; In addition, statements of account would be issued quarterly; Data storage and retrieval will be through electronic services. Payments of contributions could be made; Through their trade associations Directly to an accredited collector/agent www.peoplespensiontrust.com
4. THE INFORMAL SECTOR PROJECT (7/8) Anticipated Challenges: Trust/Credibility; High illiteracy rate; Low earnings; Poor savings habit; Unwillingness to save for long periods; Desire for loans; and Data management. www.peoplespensiontrust.com
4. THE INFORMAL SECTOR PROJECT (8/8) SSNIT Informal Sector Fund (SISF): Solely owned by SSNIT to operate the SSNIT Informal Sector Scheme; SISF was set up after a pilot phase of 4 years (2005 2008) Operated from 2008 to 2013; Challenges of SISF: High operational cost; Lack of funding Lack of political will; Advent of new law (Pension Act 2008, Act 766) www.peoplespensiontrust.com
Pension Act 2008, Act 766 TIER 1 TIER 3 TIER 2 To be managed by SSNIT To be managed privately To be managed privately 13.5% of gross salary 5.0% of employees gross salary Defined Contribution Defined Benefit Scheme Voluntary (Informal Sector Pension Scheme/Provident Fund) Defined Contribution Mandatory Mandatory www.peoplespensiontrust.com
5. PEOPLES PENSION TRUST (PPT) EXPERIENCE (1/4) Invested a lot of time, energy and money in activities to educate informal sector workers on the idea of pensions; Efforts and experimentations were made to reach people in the lower spectrum of the informal sector and in more rural areas; and Deployed Sales Agents who were compensated on commission basis. The above led to high operational cost and lower average contribution amount; www.peoplespensiontrust.com
5. PEOPLES PENSION TRUST (PPT) EXPERIENCE (2/4) Lessons learned: Sustainability doesn t only depend so much on the product as innovation but the company s core competence to; Observe closely and adapt; Analyse and understand the market quickly; and React creatively and effectively www.peoplespensiontrust.com
5. PEOPLES PENSION TRUST (PPT) EXPERIENCE (3/4) Shift in Strategy: Technology Robust Application software which is user friendly for members in particular Application that can run on feature and smart phones (USSD) Electronic Payment platforms Allows for easy access of information (Member Statement of Accounts) www.peoplespensiontrust.com
5. PEOPLES PENSION TRUST (PPT) EXPERIENCE (4/4) Shift in Strategy: Form Strategic Partnerships Telcos with payment platforms Banks with large branch network Trade Groups/Associations with large membership Financial Institutions (Banks, Savings & Loans, Insurance Companies) to have a comprehensive products Target the Middle Class/GIG Economy www.peoplespensiontrust.com
6. CONCLUSION (1/2) Global 2 Billion Increasing Cost of Living Africa 480 Million Break up of joint family support Global Aging Ghana 12 Million Old Age Poverty The case for micro pensions is compelling www.peoplespensiontrust.com
6. CONCLUSION (2/2) The outlook is quite challenging but promising Add bundled products Create a well-known brand through social media engagements, continuous educational campaigns, good outreach programmes, etc. Adopt simple on-boarding process Adopt simple and effective contribution collection processes www.peoplespensiontrust.com
CONTACT US Loc: No.5 Sam Nujoma Close, North Ridge Adjacent the Visa Section of the German Embassy Accra-Ghana Tel: +233 302 738 242 Website: www.peoplespensiontrust.com Email: info@peoplespensiontrust.com www.peoplespensiontrust.com
