Efforts to provide a retirement income for millions of low-wage workers in Ghana are becoming a reality. Benno Vermeer, an actuary at Aegon, is in the West African country supporting a new micro pension initiative.
With life expectancy on the rise in Africa and inadequate social-security support for the elderly, those working in the informal sector have more need than ever to save for the years of their life when they can no longer work.
Yet in countries like Ghana, traditional pension products only serve the needs of people working in formal jobs, in government agencies or large companies. But that leaves as many as 85% of workers without a pension.
But a new start-up is beginning to make a difference to Ghanaians whose work supports the backbone of the country's economy. The People's Pension Trust (PPT) was launched last year as a tailor-made solution for millions of informal workers. Its 'My Future' micro pension is designed for people who have variable, irregular income, and limited access to financial services – for example, groups such as farmers, fishermen, taxi drivers and street vendors.
Aegon supports PPT's efforts in two ways: financially, through its membership of the Dutch Association of Insurers (a partner in the Dutch Micro Pension Foundation), and technically, through the sharing of knowledge and expertise.
One of Aegon's pensions experts, Benno Vermeer, has been on secondment in Ghana since March 2017. He's helping the PPT to set up its back-office operations in the West African country.
An innovative approach
The chief advantage of My Future is its flexibility. Anyone aged between 16 and 55 can sign up. So long as they contribute to the fund for at least five years, they can expect to receive a basic monthly pension when they retire. Customers can contribute to their pension whenever they have some cash to spare, and they can do this at any time via mobile transfers or savings groups in local communities.
The PPT's vision is to provide pension coverage to at least 500,000 Ghanaians over the next five years. The company educates customers about the benefits of saving for their future, is fully regulated, and has already signed up thousands of clients since being set up last year.
Local understanding, global expertise
"So far, it's been an amazing experience to see first-hand how micro pensions can make a positive difference to people's lives," says Benno Vermeer.
"As an Aegon employee, it makes me proud to know we are helping to offer a certain degree of financial security to millions of people in the informal sector. Even if people only invest a couple of dollars a week in their micro pensions, it can be enough to keep them out of poverty when they reach old age."
Vermeer says working in West Africa has been an exciting learning curve. "What we learn from our work here in Ghana will be useful for other countries. The key challenge, however, is raising awareness. Saving money for such a long period is a new experience for most people in the informal economy, and we need to earn people's trust so that they know their money will be kept safe and will earn a good return on investment.
"We are still in the early days, but I am confident that many more thousands of people will see the benefits and will sign up for micro pensions in Ghana over the years ahead."
Building on past efforts
Ghana is not the first country in which Aegon has supported micro pensions. In 2016, Aegon provided financial support and technical expertise for the rollout of a similar scheme in southern India's Madurai region.
So far, tens of thousands of people have signed up, each saving just over one euro (100 rupees) per month. While that sounds like a small sum, in a developing country such as India or Ghana, it can make the difference between a relatively secure old age and serious deprivation.