The Bank of Ghana says the pensions sector continues to expand in spite of emerging vulnerabilities from weak investment outturns.

Total pension funds grew by 18% year-on-year to GHS26.29 billion (7.5 percent of Gross Domestic Product) as of the end of December 2019, the Central Bank said in its Financial Stability Review.

The strong growth was mainly driven by private pension funds, it said.

Broadly, the pensions sector exhibited strong potential for growth in the medium to long term as policy measures were targeted at increasing contributions flows, improving sustainability of the public pension fund and broadening the third tier scheme via the inclusion of the informal sector.

However, in the period under review, the sustainability ratio, measured as investment income to total expenditure and the fund ratio (fund size to its liabilities) of the public pension fund declined to 0.09 and 2.60 respectively.

The report explained that the consistent rise in benefit payouts from the public pension scheme amidst a stable dependency ratio (pensioners to active contributors) suggests that enforcement of mandatory contributions and optimisation of investment returns remain critical in ensuring the sustainability of the public pension fund.

Meanwhile the National Pension Regulatory Authority says it is considering proposals to increase the retirement age from the current 60 years.

It is also looking at increasing the deductions made from workers’ salaries for the scheme.