Pension Superannuation Allowance Indexation in Ghana: Reality or Myth?

Abstract

This study sought to examine the pension indexation in Ghana in the light of the prevailing macroeconomic indicators couple with the overall performance of the Social Security and National Investment Trust (SSNIT). The bases of pension superannuation allowance indexation remained questionable and a subject of dissatisfaction among retirees. The study purposively gathered time series data from 1991 to 2013 in relation to annual augmentation of pension superannuation allowance, Treasury bill rates, inflation rates, minimum wage and the performance of SSNIT pension scheme. The data were analyzed using paired wise observation test to ascertain whether beneficiaries of the scheme get real positive return on their investment and the sustainability level of the scheme. The findings of study revealed that the pension indexation is not significantly different from the macroeconomic indicators except Treasury-bills (T-bills)  rate but significantly different from the performance of the scheme. Furthermore, retirees do not get real positive returns on their investments and the sustainability rate of the scheme is on the decline. The study concludes that the SSNIT pension allowance indexation is unrealistic and the scheme is not sustainable at the current operational level. The Trustee should engage in more profitable investment portfolios, minimizes its administrative expenditure and review the pension indexation upwards to ensure retirees get real positive returns for their investment. The article 80 of the pension act 766 which provides legal backing to pension indexation in Ghana should specify the relationship between pension indexation, inflation and minimum wage rates.

Keywords: Pension Indexation, Reality and Myth