Target informal sector with Tier-3 pension schemes – Minister

Ignatius Baffuor-Awuah, Minister of Employment and Labour Relations

Minster for Employment and Labour Relations, Ignatius Baffuor-Awuah has charged players in the insurance and pensions management sector to target the informal sector of the economy with the Tier-3 pension schemes. 

He was delivering his keynote address at the second virtual Pensions Conference, jointly organized by Penguard Consulting and Ghana Talks Business to discuss whether the Tier-3 pension has lived up to its billing since being launched 10 years ago.

The Minister noted that as of the end of 2019, total pensions fund access under management in the country, stood at GHC26.3 billion with just about 1.8 million workers in the formal and informal sectors covered.

He disclosed that, only 3% (237,000) of the 7.9 million workers in the informal sector formed part of the 1.8 million covered.

This, according to him, shows that the informal sector still remains a fallow ground as far as pensions are concerned, adding that even if a quarter of of informal sector workers are covered, that would be a lot of money in the pension kitty for investments and future benefits for pensioners.

The Minister said the only reason the informal sector still remain largely fallow is because of the misconception that they cannot afford any form of pension.

He therefore urged fund managers and trustees set aside that misconception and target the tier-3 scheme at the informal sector, saying that “…in terms of resources that they manage, they are as good as many of those in the formal sectors.”


According to the Minister, government has put a number of measures in place to drive pension adoption in both the formal and informal sectors; those measures include intense sensitization and awareness creation, establishment of pension schemes for various occupational groups, introduction of diverse mobile pension products, leveraging on technology and the design of micro-pensions policies among others.

In terms of regulation and management, he stated that the National Pensions Regulatory Authority (NPRA) has been organizing training sessions for the various pension fund managers to equip them for effective management of tier-3 pensions in particular.

He believes the capacity-building sessions would ensure skills development in the trustee companies and also lead to the growth of the value of pensions and enable trustees to provide better benefits for retirees.


Ignatius Baffuor-Awuah said government is also in the process of reviewing aspects of the pensions law to strengthen regulation and guarantee decent pensions for all.

He said in 2018, government in partnership with the World Bank worked on reforms in the pensions sector and currently there are ongoing stakeholder engagement that would lead to the effective implementation of the reforms to ensure a robust pensions industry that would be a major contributor to the economy.

The reforms are geared towards improving equity and removing disincentives, reducing administrative cost, maintaining and improving investment performance, and improving pensions coverage across sectors.

The Minister believes that in spite of the current challenges plaguing the pensions industry, the outlook is promises as the numbers speak for themselves, adding that in the coming  months, government will introduce the risk-based supervisory approach for the regulation of the industry to further strengthen the security of pension funds and investments.

“The merging of SSNIT numbers and the Ghana Card numbers also promises to improve participation in the pensions industry and government will also leverage on technology to enable the regulator and players to bring their services closer to the people,” he said.

Ignatius Baffour-Awuah said government can, however, not do it alone, but would need all industry stakeholders to come on board and make it work.


Meanwhile, panelists at the virtual conference agreed that technology and awareness creation are critical to mainstreaming tier-3 pension scheme in the country.

Tier-1 and Tier-2 pension schemes are compulsory and targeted at the formal sector workers, but the 3 Tier scheme, which is not compulsory, has been on the lowkey over the past ten years that it was introduced in the country.

The panelist agreed that tier-3 has not fully lived up to its bill, and they gave its performance so far a score of 40% in the first five years, and 60% in the last five years, indicating that things are improving gradually but there is more room for improvement.

They believe digital technology and consistent education are the way to go if tier-3 pensions is going to be adopted on a large scale as expected.

The argument is that because tier-3 is personal and voluntary, it took a lot of education for the few people to understand it and get on board, and even after getting on board, consistent contribution was initially a problem until digital technology was introduced.

IT Consortium in collaboration with MTN Ghana and some insurance companies and fund managers, introduced the digital platform where individuals can register digitally and also send their monthly contributions via mobile money.

The platform also gives the contributors regular reminders when the contribution date is coming up and they can also access statements and monitor how their contributions are going on the same platform.

That, according to CEO of IT Consortium, Romeo Bugyei, has been the strategy behind getting the few thousands of people in the informal sector to get on board and to fund their own pensions voluntarily.

He is confident that more can be done in that direction if industry players leverage on technology to driver the tier-3 scheme.

Meanwhile, the panelist also lauded Enterprise Trustees and Ecobank for collaborating to launch the Pensions Back Mortgage Scheme that allows contributors to use their tier-2, tier-3 and personal pension funds as collateral for 100% housing mortgage, and pay back over a 15-year period.


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