Ghana’s pension industry is on track to amass GH¢100 billion in assets under management (AUM) by the end of 2025, a milestone initially projected for 2026, driven by robust market activity and regulatory reforms. David Tetteh-Amey Abbey, Deputy CEO of the National Pensions Regulatory Authority (NPRA), revealed the accelerated growth at the 3rd Annual Forecast Dinner hosted by CFA Society Ghana, signaling both optimism and caution for the sector.
As of June 2024, pension funds totaled GH¢78.2 billion, heavily skewed toward government securities like Treasury bills and bonds. This concentration, however, has exposed vulnerabilities. The 2023 Domestic Debt Exchange Programme (DDEP), which restructured GH¢31 billion of pension-held debt, laid bare the risks of overreliance on sovereign instruments. “When government coughed, we all caught a cold,” Abbey acknowledged, referencing the sector’s 85% exposure to state debt during the crisis.
To mitigate such risks, the NPRA revised investment guidelines in 2024, raising the cap on alternative assets—including private equity, infrastructure, and real estate—from 10% to 25%. This shift could unlock GH¢25 billion for non-traditional investments by 2025, a move aimed at fostering diversification and resilience. Yet, pension managers remain wary, clinging to familiar government securities amid sluggish bond markets and a dearth of compliant, high-yield alternatives.
The push for offshore investments has further highlighted regulatory tensions. Fund managers, seeking currency diversification and safer returns, lobbied to raise the 5% cap on foreign assets, but the NPRA resisted, citing concerns over cedi stability. The local currency’s 19% depreciation against the dollar in 2024 underscored these fears, even as critics like Kofi Kodua Sarpong, CEO of Sarpong Capital, argued for access to “transparent international markets” to hedge against domestic volatility.
Emerging instruments such as green bonds, asset-backed securities, and cocoa-linked bonds offer hope for balanced growth. The NPRA now permits up to 5% of investments in green bonds without affecting sectoral limits, incentivizing sustainable finance. Meanwhile, calls for vibrant corporate and municipal bond markets aim to expand domestic options, though progress remains incremental.
Abbey urged financial innovators to develop “solid, yet safe” products, explicitly warning against volatile assets like cryptocurrency. His appeal reflects a broader challenge: aligning fiduciary prudence with the urgency to modernize. While Ghana’s pension sector strides toward its GH¢100 billion target, the path forward demands not just regulatory tweaks but a cultural shift—one that embraces calculated risk without compromising the retirement security of millions.
The industry’s growth, while impressive, now hinges on bridging the gap between ambition and execution. As Ghana’s population ages and economic pressures mount, the stakes extend beyond balance sheets to the very livelihoods dependent on these funds. The NPRA’s balancing act—between safeguarding assets and stimulating innovation—will define whether this milestone becomes a springboard for sustainable prosperity or a cautionary tale of missed opportunities.
