The 2020 edition of the Pension Strategy Conference, a collaboration between Axis Pension Trust and CFA Society of Ghana, brought together key stakeholders to take stock and strategize for the future as we mark the tenth anniversary of the implementation of Act 766. It is widely recognized that significant progress has been made in the pension industry since Act 766 came into force. Testament to this success is the growth in pension assets to over GHS 13 billion, inclusive of assets managed by Private Corporate Trustees such as Axis Pension Trust.
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.
Reflecting on the events that led to the recent financial crisis, it was concluded that financial practitioners should not relent in their efforts to enhance financial literacy in Ghana. This was an underlying reason for organizing the Strategy Conference and Axis Pension Trust is committed to partnering workers throughout their retirement planning journey to ensure they are on track to achieving a dignified retirement.
Axis Pension Trust is delighted to continue the success story from previous years’ as we share deep investment insights from a survey of top fund managers on Ghana’s economic outlook and investment positioning for 2021. The 2021 edition of the Pension Strategy Conference will be held virtually due to the Covid-19 Pandemic. Click the link below to register for the conference: