As Ghana grapples with the rising cost of living, concerns over the adequacy and sustainability of pensions continue to dominate public discourse.

Speaking on the Asaase Breakfast Show on Thursday (19 June), leading voices in pension regulation, fund management, and retirees’ welfare painted a sobering picture of a system straining under low contributions, limited investment options, and rising economic pressure.

Hayford Atta Krufi, former Chief Executive Officer of the National Pensions Regulatory Authority (NPRA), laid bare a fundamental truth: the nation’s pension crisis begins with low wages.

“Your pension is a reflection of what you earn while working. If your salary is low, your retirement benefits will be low. That’s the heart of the problem,” Krufi said.

He explained that under Ghana’s three-tier pension scheme, workers contribute 18.5% of their basic salary, split between tier one (SNIT) and tier two (mandatory occupational pensions). While the system allows voluntary contributions under tier three, Krufi noted that most workers “only do the mandatory” due to income constraints, limiting their retirement security.

Pensioners Speak: “We’re Forgotten”

Joe Quist, National Secretary of the Government Pensioners Association, shared the frustrations of thousands of retirees, especially those under the old Cap 30 pension scheme, a non-contributory model inherited from colonial rule.

“Most of us earned very little during our working years, and now our pension allowances are even smaller. Some of our members receive as little as 10 Ghana cedis a month,” he revealed.

Quist lamented that every time salaries are reviewed for active workers, pensioners are sidelined. “We’re no longer in the system, so we’re forgotten,” he said. From over 100,000 members, the association now has just 27,000 due to deaths and lack of new enrolment.

Fund Managers Cornered by Regulation

Stephen Teye, pension fund manager at IGS Financial Services, addressed another limitation: Ghana’s rigid regulatory framework for investing pension contributions. He noted that while there has been “tremendous growth” since the pension reforms began in 2010, investment portfolios remain largely restricted to low-risk instruments like government bonds.

“Yes, we’re looking for alternatives to improve returns, but foreign investments require multiple regulatory approvals. Even within Ghana, the available asset classes are limited,” Teye explained.

Krufi agreed, adding that while fund managers are permitted to invest in a broad range of local instruments—from treasury bills to real estate—there are caps on how much can be allocated to each asset class to mitigate risk.

However, he acknowledged that tier one (SNIT) has greater investment flexibility, including limited offshore exposure, compared to tier two and three.

The Harsh Math Behind the Problem

Ghana’s replacement ratio—the percentage of a worker’s salary that they receive as pension—was another concern. International best practice recommends 45%, but most Ghanaian pensioners fall far below this mark.

“Around 45% of contributors to SNIT pay in based on salaries of just 1,000 cedis or less. That’s why many end up with pensions lower than 300 cedis a month,” Krufi said.

SNIT has had to intervene by setting a minimum pension floor to prevent retirees from falling below the poverty line—but this, too, raises questions about long-term sustainability.

Ghana’s pension system has made strides since the introduction of the three-tier model, but rising inflation, low earnings, and weak compliance threaten to erode its progress.

“It’s difficult, but we must act,” said Krufi. “A decent retirement shouldn’t be a privilege. It must be a right.”

Source: asaaseradio