Pension crisis looms: Offshore opportunities viable — Experts
• Afriyie Oware — CEO of Axis Pensions

Pension crisis looms: Offshore opportunities viable — Experts

THE Chief Executive Officer of Axis Pensions Trust, Afriyie Oware has warned of a potential pension crisis if the industry does not adopt a new approach to how pension funds are invested.


He said the current economic challenges in the country had not only tested the resilience of pension funds but also exposed vulnerabilities in pension fund portfolios.

Speaking at the 2024 Pensions Strategy Conference, he said pension funds have suffered significantly due the domestic debt restructuring and the inflation spike, a situation which had derailed the retirement outcomes of contributors.

“It is a reality that the pension fund contributor now faces about a six-year journey to recoup the value they had lost in 2021.

“The impact of the recent inflation spike has been worse than the effect of all the corporate bond defaults we have seen over the last 10 years,” he stated.

He said the retirement prospects of Ghanaians was currently bleak, yet the industry was doing very little to re-align its portfolios to mitigate the risks.

He noted that the Social Security and National Insurance Trust (SSNIT), which many private pension fund institutions look up to had just US$ 1.5 billion of assets under management, with the private pension industry together having just about US$4 billion.

“Government which is the guarantor of the Tier 1 pension scheme is too broke to bail out the pension system and this signifies that there could be a potential pension crisis that is looming,” he stated.

Alternative investments

Mr Oware said with the outlook for the economy still grim, it was necessary for fund managers to look for alternative sources of investment.

He said with about two million contributors to the various pension schemes, Ghana had a total of US$ 6 billion of assets under management, which compares unfavorably with a country like Botswana which has just about 350,000 contributors but have over US$ 7 billion assets under management.

He said this underscores a critical failure in the country’s approach to pension fund investment, as the industry is over reliant on government bonds at the expense of investing in the productive private sector.

“Until last year, pension funds in Botswana were required to invest just 30 per cent on the domestic market, with 70 per cent invested offshore. South Africa and Kenya also have 45 per cent and 15 per cent respectively of assets invested offshore.

“The innovation that is creating change and economic value in the world is coming from the West and China so if we are not innovating, our capital can capture some of the value that is being generated from some of the innovation happening in the world,” he stated.

He said this was why it was logical to consider offshore investments, adding that the current predicament calls for a strategic shift in how pension funds are allocated.

Investing offshore 

Speaking in an interview with the Graphic Business, the Chief Investment Officer of the Black Star Group, Adjei Boateng, who was the keynote speaker at the conference, said the world is at a point where every investment that is available anywhere in the world is available to Ghanaians.

He said pension fund managers must, therefore, take advantage of this and invest some of the funds in some of the blue chip companies across the world.

“Investments should no longer be restricted to government bonds, we are at the point where the likes of Apple, Microsoft and companies that are at the forefront of creating the future are now available for Ghanaians to invest in,” he stated.

Commenting on the strict regulations surrounding the investment of pension funds, he said the law currently allows for the investment of up to five per cent of pension funds offshore.

He said although this was not substantial, the industry was not even doing up to that and could, therefore, not go to the regulator to ask for more.

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