Pension Strategy Conference 2020 – Putting It All Together

The governance of pension assets as initially designed by stakeholders to ensure safety has largely been attained. Some of the key takeaways from the conference are highlighted below:

Improve Pension Coverage with Informal Sector

However, the conservative nature of pension assets in Ghana – over 70 percent invested in government securities could derail growth of the industry. In addition, pension coverage which stands at a 1.6 percent penetration rate is woefully inadequate and could exacerbate the issue. To boost coverage, formalizing the informal sector could provide the answer and in that vein ongoing efforts to digitize the economy would be an important enabler in the formalization process.

Increase Diversity of Pension Portfolio

The general consensus from the conference was the need to consider increasing exposure to non-sovereign assets that offer higher risk adjusted return such as Equities, Private equity and Real Estate. The right regulatory framework should be instituted for these asset classes to exist in the ecosystem and practitioners must ensure that capacity is built in-house in order to evaluate these assets on behalf of scheme members/beneficiaries. The government can go a step further by providing incentives to promote the development of these asset classes.

Explore Offshore Opportunities for Diversification

In addition, taking into account that 100 percent of pension assets are invested in Ghana and with a majority of that investment allocated to government securities, pension assets face huge concentration risk. This is driven by a number of factors including lack of properly regulated alternative and poor local stock market returns and liquidity in recent years. Looking at government’s debt level, it will be prudent to start the conversation on exploring offshore options for diversification.