By Ebenezer Chike Adjei Njoku
According to John Awuah, CEO of the Ghana Association of Banks, the local pension system needs improvements based on diversification, governance reforms, and professional management to stay sustainable and provide sufficient retirement benefits for Ghana’s growing elderly population.
Addressing the attendees at The Money Summit (TMS2025) 2025 event in Accra, which was themed around ' Enhancing investment and pension management strategies for sustainable retirement income and economic development Mr. Awuah stated that the nation needs to move away from depending heavily only on government securities and adjust the pension fund portfolios to align with the economic challenges posed by an increasingly unstable global environment.
"The direction of investment and pension management necessitates a basic change in how we handle risk, diversify assets, and manage governance," he emphasized.
"We should adopt collaborative investment strategies, enhance financial education, and guarantee skilled oversight of our retirement funds," he noted.
His comments follow the introduction of the controversial Domestic Debt Exchange Program (DDEP), which notably impacted pension fund values, eroded investor trust, and garnered criticism from both fund managers and participants.
"As we've observed, the DDEP affected confidence—especially regarding their experiences—as pension funds saw a substantial decrease in their valuations," stated Mr. Awuah.
"The investment journey acts as a hands-on educational program highlighting the importance of diversification," he noted.
The banker advocated for increased focus on alternative investment options, pointing out that the Ghana Stock Exchange (GSE) has introduced a Commercial Paper market for the first time—providing a practical substitute for government bonds.
"Commercial paper presents a feasible substitute for government securities, offering brief fiscal benefits along with lower vulnerability to macroeconomic risks linked with governmental debt," he stated, further noting that it can function as an effective instrument for managing short-term liquidity within pension funds.
Mr. Awuah pointed out that beyond commercial paper, private equity, real estate, infrastructure, and renewable energy are attractive asset classes. These alternatives can offer greater protection for pensions against economic upheavals and enhance long-term financial gains.
The push for diversification was rooted in worldwide examples. Mr. Awuah referred to the Norwegian Government Pension Fund as an exemplary model.
He mentioned that the $1.3 trillion fund has implemented a varied investment strategy encompassing stocks, real estate, private equity, and infrastructure. This strategic diversification has shielded the fund from market volatility and established it as a significant participant in the international investing arena.
He contended that Ghana might replicate elements of this approach by guaranteeing proficient management and strategic allocation for its pension funds. Specifically, he called for improvements in the operations of SSNIT—the country’s premier pension fund—which has often been criticized regarding its oversight mechanisms.
"We should consistently make sure that the core leadership team of the Social Security and National Insurance Trust remains competent and effective, and their terms should not coincide with those of state-owned enterprises' leaders, who often serve during changes in political leadership," he stated.
"Pension fund managers should adhere to professional standards emphasizing professionalism, performance, transparency, and long-term systemic management," he added.
Mr. Awuah additionally highlighted the increasing worldwide pension deficit—the unpaid obligations of state-funded pensions, especially those designated for public sector workers—which the International Labour Organisation projects will surpass $400 trillion by 2050.
Similar to numerous developing nations, Ghana grapples with an increasing gap in retirement funds; the typical monthly pension remains insufficient to meet essential living expenses.
Based on information provided by the National Pensions Regulatory Authority (NPRA), a significant portion of pension assets continues to be invested in government debt securities. This concentration restricts their capacity for growth and exposes these funds to risks associated with governmental stability.
The regulatory framework permits investment managers to allocate up to 75 percent of assets under management (AUM) in Government of Ghana debt instruments, with not more than 35 percent going towards money market products.
For Corporate Bonds/Debts (which includes REITs, mortgage-backed securities, asset-backed securities, and debentures), the maximum limit is set at 30%. As for ordinary shares and open/end-funded products, they each have upper limits of 10% and 5%, respectively.
Mr. Awuah contended that pension fund managers should start investing in areas like agriculture, sustainable finance, and housing development. This approach would help boost both investment returns for stakeholders and overall economic expansion.
"By giving priority to these alternative asset categories, Ghana’s pension funds might experience enhanced returns and superior safeguarding of our retirees against market fluctuations," he stated.
Some experts have advocated for raising the current cap of five percent on the maximum allowance for overseas investments by pension fund managers.
Mr. Awuah pointed out Ghana’s inadequate level of financial literacy as a significant obstacle. According to data from the World Bank, just 27% of Ghanaians possess adequate financial knowledge. "A lack of comprehension regarding investment mechanisms leaves both retirees and individual investors susceptible to unwise choices that could endanger their future finances," he stated.
In order to tackle this issue, he disclosed that the Ghana Association of Banks is working together with the Centre for Financial Literacy and Education in Africa to increase awareness in educational institutions, religious organizations, healthcare facilities, and local neighborhoods.
The head of the Association of Bankers additionally urged for a diversified investment approach that ensures both expansion and availability, particularly catering to retirees who depend on consistent income along with safeguarding their principal amount.
"The era of pursuing long shots at the cost of capital safety has ended. Our priority should be on investments that deliver consistent yields while ensuring liquidity for urgent needs," he stated.
Provided by SyndiGate Media Inc. Syndigate.info ).