Best Practice Pension Systems in Developing Nations
Edward Attah-Botchwey

Abstract
Pension is an arrangement to provide people with an income when they are no longer earning a regular income. The experiences of other countries in social security suggest that Ghana is not the only country with its problems in the running of social insurance schemes. However, when these problems are identified, it is important to devise an effective set of mechanisms for reviewing the general operations of the social insurance scheme and especially for assessing the financial integrity of budgetary operations. The article therefore presents and analyzes models for revising the public pension schemes that take account of aspects of ‘best practice’ and address the weaknesses of the existing schemes. To this end, the administrative cost to total contributions ratio of Social security pension fund is decreased successively from the current level to 20% to 15% to 10% to 5% under two scenarios, yield of 10% and of 17%. As the ratio decreases, the funds last longer, with the biggest increase occurring between 10% and 5%; the funds last longer under the scenario with the higher yield. In other words, decreasing the cost of operation and improving its investment income will naturally extend the life of the reserves of the social security pension trust. This increase in the pool of funds can contribute significantly to increasing funds for long-term savings and investment. As expected, the funds of the system run out earlier when the Cap 30 (Government unfunded pension scheme) benefits are paid, but this takes a year longer with the higher yield.

Full Text: PDF