The Domestic Debt Exchange Programme will blight the fortunes of pensioners and erode the gains in private pension funds, Dr Kofi Anokye Owusu-Darko – a former Chief Executive Officer-National Pensions Regulatory Authority (NPRA) – has warned.

The value of private pension funds – 2nd-Tier and 3rd-Tier – stood at GH¢28billion, 71 percent of the industry’s GH¢39.6billion total assets under management (AUM) in 2021. He however said the DDEP, in its current state and form, will have a negative impact on retirement incomes and erode confidence in the three-tier pensions system, particularly private schemes, if allowed.

“Labour unions need to touch base with their members since – unlike public pensions (tier 1) which may be mandated to take decisions that will collectively bind their members – private pension funds, 2nd-Tier and 3rd-Tier, are vested in the individual names of their members and their express consent is needed,” Dr Owusu-Darko said in an article to the B&FT.

He said the Programme is an avoidable risk that trustees holding assets in the trust should desist from participating in.

Similarly, other industry watchers are concerned that the sustained growth in private pension schemes – since the inception of the three-tier system in 2010 – could be jeopardised if private pension funds are roped into the Debt Exchange Programme.

The government through the DDEP is requesting holders of bonds to voluntarily swap around GH¢137billion of domestic notes and bonds for new ones with extended maturity dates. The Programme requires the participation of at least 80 percent of bondholders.

The Programme has however been met with resistance from various investor groups – including individual bondholders, pension bondholders and financial analysts.

For instance, after carefully examining the Programme, the Pensions Chamber concluded that it will be detrimental to the interests of contributors to pension schemes.

“The Pensions Chamber would like to assure contributors to pension schemes that the industry has not agreed to the Debt Exchange Programme proposed by the Ministry of Finance,” it said in a statement.

Meanwhile, the Ghana Association of Banks (GAB) and the government, earlier this week, reached a significant agreement regarding terms of participation in the DDEP for banks.

The agreement includes improvements to the DDEP – such as a 5 percent coupon for 2023 and a single coupon rate for each of the 12 new bonds, resulting in an effective coupon rate of 9 percent among others.

“We are pleased to have reached this agreement with the government of Ghana. It is a significant milestone toward addressing our economic challenges and will help restore macro-economic stability and accelerate Ghana’s economic growth,” Chief Executive Officer of GAB, John Awuah, said in a joint statement on the matter.

GAB however noted that participation of its member banks in the DDEP, per the new terms, is subject to each individual bank’s internal governance and approval processes – but in any case, they must make their decision not later than January 30, 2023.