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Abstract

There is a gradual move away in African pension policy from the hitherto predominantly pay-as-you-go social insurance schemes to new social security policies that prioritize private pension. But in African economies where capital market is underdeveloped and private sector is generally fragile, the shift to private pensions has implications for income security of the elderly. This study examines the design and practice of three-tier pension scheme with dual private pillars introduced a little over a decade ago. While discussing the various categories of private pension schemes that operate under the three-tier pension plan, it echoes the view that, the design of the scheme discriminates against informal sector employees who constitute majority of the labor force in Ghana while providing protection for persons who work in the formal sector. Yet, focusing primarily on informal sector workers, private pension fund operators have been able to accumulate a greater share of pension funds in the country within a short period although they receive lesser share of workers contributions. Although this ingenuity of private pension funds is commendable, concerns remain over the appropriateness or otherwise of entrusting income security of the elderly in the care of private sector operators in a country like Ghana that lacks robust capital market.

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