Pension funds are to be invested in the real sector soon, after close to a decade of debate over the limited investment options for workers’ retirement contributions.

This is because the National Pensions Regulatory Authority (NPRA), regulator of the pension space, has disclosed that the Pensions Act, Act 766, is being reviewed to diversify investment options of pension funds from the current fixed income market to other sectors – such as real estate, private and debt equities – in what could be described as a win for the economy.

The move became necessary following the Domestic Debt Exchange Programme (DDEP), NPRA’s Chief Executive Officer, Hayford Attah Kruffi, told the B&FT in Accra on the sidelines of a winding-down ceremony of the Swiss Secretariat for Economic Affairs (SECO)-supported project with the Authority.

“The NPRA is reviewing the investment guidelines. In fact, the sector minister has given me a deadline to complete the review and get back to him; so that we can undertake some kind of forbearance and also encourage trustees to move into some kind of alternative investments, rather than just the traditional investment areas.”

The NPRA investment guidelines guide trustees as far as investment of pension funds are concerned, primarily government bonds.

The review comes as no surprise, as implementation of the DDEP has shown that overexposure of pension funds to government papers will not only affect the retirement income of workers but literally bring the business of corporate trustees to the brink of collapse – with dire consequences for the business of other pension-related service providers with its related unemployment issues.

Some of the investment areas under consideration include real estate for example, Mr. Krufi said, adding that the funds will be allowed to be invested in private equity and private debt equity, among others, going forward.

The review’s overarching goal, he explained, is to ensure that “we can move away from the fixed income market or diversify pension investments in the country”.

Asked when the review will be completed, he responded “very soon” without giving a specific timeline. He added that: “We have to consult our stakeholders. As regulators, we don’t hold a repository of knowledge. Before you can have a very effective review, you have to ensure that all your stakeholders are on board”.

Reacting to whether the review process is long overdue, he said the existing law has served a good purpose and helped grow pension assets to about GH¢50billion – explaining that in an economy time changes, and “you will also have to review your investment decisions. For example, when you want to invest now, you have to consider things like the environment, governance and the rest. These things were not part of investment decision-making some years ago, but because of changes in society…”

The need to rethink investment options for pension funds was supported by Dr. Simone Haeberli, deputy Head of Mission and Head of Cooperation for the Swiss Embassy in Accra.

She said: “We saw through the current economic challenges and the debt exchange programme that, maybe, there is a need for a review of the Pensions Act; because pensions should have other opportunities than just investing in government bonds. This is something that needs to be looked into and government is already taking care of it; and I think that is a very good step for the pensions industry’s future”.

SECO project

In 2008, Ghana’s pension system was reformed with passage of the National Pensions Act 2008 (Act 766). The Act introduced the contributory 3-Tier Pension Scheme and established the National Pensions Regulatory Authority (NPRA), among other key provisions that seek to improve the country’s pension benefits and administration.

As a young regulator, the Authority faced a number of challenges in meeting its mandate. Therefore, the NPRA through government requested support from the Swiss government through the Swiss Secretariat for Economic Affairs (SECO) to provide needed capacity for the Authority to help it become a credible regulator.

The two-phase project started in 2014 and the second phase began in 2019. The total amount financed by Switzerland was 4.2 million Swiss Francs (approximately GH¢50million).

The project was aimed at strengthening institutional capacity with regard to supervision and regulation: including strengthening the NPRA’s governance and management structure; developing the NPRA’s legal and regulatory framework as well as supervisory compliance policy and programme – namely developing a Risk-Based supervision (RBS) strategic framework among other elements.

The project achieved among others the establishment of a Risk-Based Supervision System to provide efficient and effective supervision and regulatory oversight of the entire pension industry.

The project has been successfully completed, with some of the key results being the following: training the board of directors and management of the Authority to help create synergies in governance and management of the Authority; the establishment and implementation of a Transitional Risk-Based Framework and supervision systems for the Authority; and strengthening the Authority’s supervisory compliance, especially in its SSNIT oversight.

“The NPRA expresses its profound gratitude to the Swiss government for the support that has strengthened the Authority’s governance structure and enhanced its supervision and regulatory functions.

“The Authority is also grateful to the government of Ghana and its agencies which also provided assistance and support to facilitate the project’s implementation,” a statement from NPRA read.

Corporation beyond SECO

“We have quite a large investment or cooperation portfolio with government and the people of Ghana. Ghana is one of our longstanding partners in Africa, and we work along various fields ranging from micro-economic support to decentralisation support. So one of the large, incoming projects is to support the District Assemblies’ Common Fund to perform very well. We are also very active in the financial sector,” Dr. Haeberli noted.

She added that her country is also looking to cooperate with the Ghana Stock Exchange, Ghana Commodities Exchange, in addition to some value chain activities: “Aside from cocoa, we are supporting producers of cashew nuts and oil palm to improve productivity. We are also in collaboration with the Ministry of Energy to promote renewable energy – cleaner energy sources and efficiency with the aim of promoting a cleaner Ghana”.

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