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BoG report: Pension funds grew 27% in 2020

The BoG report said the strong growth of pension funds (27%) in 2020 is attributable mainly to the partial settlement of government indebtedness to the Tier 1 scheme and the consistent growth of private pension funds.

Total pension funds increased to GHC33.5 billion from GHC26.4 billion in 2019 at end-December 2020, despite the COVID-19 pandemic and the much-anticipated decumulation of private pension funds, a new Bank of Ghana (BoG) report has stated.

The Financial Stability Review indicates that in 2020, pension funds grew by 27%, as compared to 19% in 2019. The strong growth of pension funds (27%) in 2020 is attributable mainly to the partial settlement of government indebtedness to the Tier 1 scheme and the consistent growth of private pension funds.

Private pension funds maintained a strong growth momentum in 2020.

Total private pension funds, grew by 26.8% in 2020, as compared to 33.4% in 2019. At end-December 2020, total private pension funds stood at GHC22.02 billion, as compared to GHC17.36 billion at end-December 2019.

The BoG report said the growth in private pension funds was remarkable, given the commencement of the decumulation of private pension funds and the granting of emergency access to pension benefits amid the pandemic. In 2020, investment of private pension funds was held primarily in the form of government securities, constituting 60.2% of the total.

The growth of pension funds under the Basic National Social Security Scheme (BNSSS) rebounded in 2020. From a negative growth in 2018 (-3.5%) and 2019 (-1.2%), pension funds under the BNSSS recorded a growth of 26% in 2020.

The growth was mainly due to the settlement of part of the government’s indebtedness to the scheme. At the end of December 2020, total funds under the BNSSS stood at GHC11.35 billion, compared to GHC9.08 billion at end-December 2019.

According to the report, downside risks to sustained growth in the outlook for the public pension funds include the late payment of contributions, rising outstanding contributions, increasing benefit payments, and weak investment outturn.

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