No Financial Retirement Plan: A Casting Shadow in Ghana – Part I


Financial planning is the center of most activities of the average Ghanaian. This is evident in most behaviors and decisions Ghanaians make in their everyday life activities. The reasoning is that people table financial plans that they perceive will cater for them in times when they require assistance of some sort. This concept or line of reasoning has given rise to various forms of hedging activities including short- & long-term investment packages and insurance policies.

In Ghana, one of such common packages is the retirement investment plan package, a common one usually referred to as the ‘Pension Scheme’ administered by the Social Security and National Insurance Trust (SSNIT). This package essentially provides for the needs of Ghanaians at their retirement periods when they are unable to engage in active public or private service. Also, for people who can no longer work due to permanent disease or illness, the Scheme also pays such invalidity pension regardless of age and with very minimal contributions. Despite these benefits that the scheme presents to Ghanaians, patronage has been on the low with the latest record indicating that only a little above 1.6 million people representing about 11% of workers in the country are actively contributing. Out of this number, a little over 14,000 self-employed workers contribute to the SSNIT Pension Scheme. This low coverage is attributed to the nature of the economy of the country, where most people are engaged in their own businesses and do not see the need to enroll onto a structured social security scheme. Industry analysts assert that if drastic measures are not taken and implemented to have such workers put on a formalized social security scheme, it will lead to an increase in poverty among the aged in the near future.

This brings to the light, the recent public discussion on retirement planning. Retirement planning determines the near-future income goals and the actions and decisions necessary to achieve those goals.

Understanding Retirement Planning

Retirement planning is a lifelong process and require a lot of commitment and discipline. It is the best way to ensure a safe, secure, and exciting retirement. You can start at any time, but it works best if you factor it into your financial planning from an early stage which will be explained as you read along.

Retirement planning here will be the planning that one does to be prepared for life after paid work ends, usually capped at 60 years in Ghana. It involves weighing your fixed income against the cost of living, spending prudently, and saving significantly where extra income flows in.

If you are young man or woman or you are still building your career, retirement may not be a priority at this point in your life but someday it will be. To help ensure you have a financially secure retirement, it is advisable to create a plan early in life or right now if you have not already done so. By diverting a portion of your salary or wages into a retirement savings plan, your wealth can grow exponentially to help you achieve a fun fulfilling period on retirement. The emphasis that one puts on retirement planning changes throughout different stages of life. Below is a general guideline for successful retirement planning at different stages of a Ghanaian.

Youthful Age (Ages 25–35)

In Ghana, most individuals after school find themselves in active employment or being self-employed between the ages of 25 to 35. These group of people may not have a lot of money free to invest, but they do have the most powerful weapon in investment-TIME! They have the time to let investments mature, which is a critical and valuable piece of retirement savings. This is because of the principle of compound interest. The most ‘magical’ and ‘powerful’ concept in investment is the Compounding interest.  It feeds on time and patience. Compounding interest puts your money to work and grows larger as it feeds on itself. With compounding interest, a pesewa today, is a fortune tomorrow.

Compound interest allows interest to earn interest, and the more time you have, the more interest you will earn. Even if you can only put aside GHC 50 a month, it will be worth three times more if you invest it at age 25 than if you wait to start investing until age 45. You might be able to invest more money in the future, but you will never be able to make up for lost time.

Early Midlife (Ages 36–50)

These group of people tend to face several financial constraints. Within this group are individuals who have started family life which comes with financial responsibilities like childcare, mortgages, and personal loans (credit and debit cards). Others may still be clearing student loans and running insurance premiums on their accounts. Nevertheless, it is very necessary to continue saving at this stage of retirement planning. The combination of earning more money and the time you must invest and earn interest makes these years some of the best for aggressive savings.

People at this stage of retirement planning should continue to take advantage of any Defined Contribution Plan (Tier 2 and Tier 3 or Provident Funds).

Late Midlife (Ages 50–65)

Within this group, most of the personal loans, mortgages, credit, and debit cards have been paid off. It is also likely for those who had kids at a very early age, to shave less dependents since their kids will likely be in active employment and this leaves them with more disposable income. However, more disposable income does not mean aggressively investing. One’s investment accounts at this age should become more conservative or relaxed.

At this stage, quite a few individuals are likely to be high-income earners. For such high-income earners there may be those that started their retirement plans late and may decide to contribute additional funds to make up for the lost time. It is likely to be a chase of one’s shadow if the goal is to match another who started at a youthful age because the powerful effect of compounding has already taken place making it almost impossible to match up (hence the advice to start early no matter how small).

It is at this point you begin to get the actual sense of what your retirement benefits will be. Everyone, including individuals with no formal education can be beneficiaries of any retirement plan package so far as they have the right attitude towards savings.

In Ghana, two most common retirement plan scheme are the Defined Contribution Plans and the Traditional Pension Scheme (commonly categorized under SSNIT or termed Tier 1). This we will discuss in part 2 of this article.

Send your news stories to and via WhatsApp on +233 244244807 Follow News Ghana on Google News Aviator


Please enter your comment!
Please enter your name here