What is your pension plan?
By Isaac Twumasi Quantus in Accra.
Thousands of pensioners are frustrated and angry at the seeming delay of the payment of their pension. Some pensioners in Ghana who opted to be placed under the new pension act, National Pensions Act, 2008, Act 766 or the Three Tier Pension Scheme, cannot understand why the Social Security and National Insurance Trust (SSNIT) has refused to pay their pension despite processing their forms since January 2011.
To me, pensions may not appear to be the most pressing issue for the African region. Whilst social security is to some extent discussed, private (or rather funded) pensions are rarely debated.
One may well ask why address this topic at all, given more critical policy priorities for the region such as education, health, poverty alleviation or agricultural development.
The urgent issue for pension reform in Africa is not only the need to introduce social protection systems to help alleviate poverty amongst the elderly. In addition there is a vital need for reform of existing pension systems in the region, the cost of which is often crowding out spending on other key areas such as health and education.
Coverage of these systems is low and usually only for civil servants or a minority of relatively highly paid workers in formal sector employment, making for highly regressive systems, with cross-subsidies required from indirect taxes (usually VAT) as pension payments from these systems frequently exceed contributions.
The need for efficient pension arrangements in the region is undoubted though the challenges for introducing them remain great. Pensions play an important role in poverty alleviation of the elderly, and one of the most vulnerable groups in any society, is particularly older women.
Basic, social support can be implemented via public pension arrangements. Indeed social protection is increasingly considered as contributing to the development process in the same way as health and education.
I think it is about time we consider funded pensions. Two important questions for African countries wishing to introduce funded pensions are firstly, what form should such prefunding take and, secondly, what are the preconditions for ensuring that the much desired macroeconomic effects actually take place?
This article was originally posted on West Africa Business Communities
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