The Private Pension Industry In Ghana Accounting Essay

Ghana, a function theoretical account in footings of economic and political stableness has late been upgraded to a middle-income state following old ages of implementing sound economic policy and stable political environment and with this ascent comes its ain challenges.

Ghana ‘s economic system is strong and promises generous future growing and the demand for a much more comprehensive societal security system is understood to be of great importance. In 2004, the authorities started a journey to reform the societal security/ pension system and these reforms created an chance for the engagement of the private sector in pension bringing. This proposed concern programs seeks to set up a legal guardian company, which will supply pension related merchandises to the formal and informal sectors of the Ghanese economic system who have traditionally been excluded from the national pension system.

The private pension industry is a new and virtually untapped industry offering an chance to function a big proportion of Ghana ‘s work force, as this subdivision of the on the job category is cardinal in the success of developing a comprehensive pension system. This industry is estimated to be valued at GHS and will take a firm stand of 2nd grade and voluntary 3rd Tier pension system. The national pension strategy has seen an mean one-year addition in part of 10 % .

The mark market for the proposed concern is a immature grownup between the ages of 16 and 45 old ages. The mark market will dwell of immature professionals, freelance persons and those who traditionally do non hold entree to the national pension strategy viz. hairstylists, mechanics, etc. With the turning grasp of procuring one ‘s hereafter, the mark group demand quick and efficient services, merchandises that meet their existing and future demands and an industry that responds rapidly to their demands.

Presently, there is no bing service supplier in the private pension industry nevertheless the life insurance industry is expected to take the manner and be the dominant participants in the proviso of these services. The proposed concern program seeks to be consumer focal point supplying first-class client services, changeless client feedback and advanced and simple merchandise design and usage. The competitory advantage of the proposed concern include handiness through the usage of a comprehensive distribution web, first-class client service and merchandise design based on demand.

The proposed concern is a private pension supplier rendering trust territory, custodian and fund direction services. The company is a limited liability company with a proposed stated capital of GHS3, 000,000.00. Each of the concern proprietors will raise GHS90, 000.00 each and the difference will be funded utilizing bank recognition lines, private investors and plus funding.

Undertaking the proposed concern program provides the undermentioned findings:

Ghana ‘s economic system remains positive and stable supplying generous growing now and in the hereafter

New pension reforms and creative activity of new industry provides both menaces and chance

Vast untapped informal market available to the new industry

Current deficits in the national pension will be catered for by private suppliers

Proposed concern provides chance for development of local capacity in pension design and direction

With robust regulative system and effectual strategic planning this propose concern has a just opportunity of wining and turning into a really successful concern and being portion of the development of the private pension industry in Ghana.

1.0 The Introduction

Research Background and Motivations

Over the old ages concern had been raised about the current province of the Ghanese societal security system which has been characterized by unequal benefits which is highly hard to populate on if non mere impossible. As pointed out by the International Social security Association ( 2003 ) , Social security systems in Africa are characteristically excessively sole and inadequate of which Ghana is non exception. Like other societal security systems in Africa, Ghana ‘s societal security system covers merely the formal work force, which constitutes a little fraction, normally no more than 20 % of the entire labour force.

This built-in feature of the societal security system makes societal security sole, as those outside the formal sectors do non hold entree to societal security or a national pension. Furthermore due to the comparatively little figure of subscribers to the national societal security strategy, benefits under the societal security strategy is unequal. Ghana like many other African states has establishments, Torahs and authorities constructions that were adopted from their colonial Masterss without much alterations and idea. The institutional constructions were most frequently designed to run into the ends and aims of the colonial Masterss who at that clip were the elite. One may inquire why societal security systems that are meant to supply protection for all in society tends to cover merely a little fraction of society.

The international societal security association points out that, most societal security systems like many other things were adopted from the colonial Masterss. These societal security systems were truly intended to cover a little organic structure of employees who were at the clip working in the colonial disposal and mine workers. This meant that all others outside this range fell outside the societal security system. This inherently remained, as most states even after independency were unable to invent societal protection plans that were tailored to the demands and fortunes of the people.

Based on the background above, I am motivated through this concern proposal to foreground the importance of the development of a much-needed private pensions scheme to augment the bing national societal security system and besides to supply those who are outside the national societal security system an avenue to procure their hereafters and have enough to populate on when they retire.

1.2 The Motivations

The motivation for set abouting this concern proposal is to bridge the spread created by the current societal security construction, which excludes those within the informal sector of the Ghanese economic system. Second, private pension programs will besides supply excess gross to those who have retired as the current benefits under the national program is deplorably unequal.

At the terminal of this start up concern proposal I hope to be able to:

Understand current economic and concern environment in Ghana

Understand the construction of Ghana ‘s societal security system

To analyse current regulative model in topographic point and its likely impact on the operations of the start up

To analyse the development of the chosen market and industry

To find the indispensable inputs for the start-up and future development programs

To analyse any academic theory on successful concern start-ups

1.3 The Aim

The chief aim of this concern program thesis is to:

Identify if any, chances and challenges for a private pensions company in Ghana

With the chances I have identified and challenges write a start up concern program for a private pension company in Ghana

Provide information on process to follow when puting up a company in Ghana

In this write up the chief focal point will be on the company runing in one specific country of pensions which is the tier three of the pensions act. Long-run schemes may see the company germinate to widen other pensions/ nest eggs merchandises.

1.4 Research Methodology

The purpose of this write up is to set together a concern program for a start up private pension company in Ghana based on sound research on the capable affair of private pensions in the chosen market and academic theory on the rules entrepreneurship and concern direction.

The research therefore will chiefly be based on secondary informations from believable governmental resources and non-governmental bureaus. I will besides do usage of academic articles, diaries and industry studies.

1.5 Structure

The write up will be split into five ( 5 ) chapters with inside informations of each chapter as follows:

Chapter 1: The first chapter will hold the debut, which contains the background, the motivations and nonsubjective, brief research methodological analysis, construction of the write up and a comparative analysis of societal security systems in the developed and developing universes.

Chapter 2: Economic Overview of chosen market, history and importance of societal security in chosen market, overview of the societal security system now and so, societal security construction, and challenges confronting the national societal security system

Chapter 3: Description of the concern thought, selling plan/strategy, pricing, mission and vision, Human Resources.

Chapter 4: Chapter four will be the fiscal program. In this subdivision will include fiscal premises and fiscal projections for the following five old ages.

Chapter 5: The decision, this subdivision will incorporate issue schemes and besides discourse any immediate or future impact of the proposed concern on the Ghanese economic system. This subdivision will besides sum up cardinal success factors of the proposed concern.

Chapter 2


Under this chapter I will look at the economic overview, economic public presentation and mentality of the chosen market for the proposed concern, I will so travel further to look at the development of societal security/ pensions in Ghana, and so look at the overview of the societal security system of the chosen market, Ghana.

As before stated under my purposes for this undertaking, I seek to supply some penetration as to what it takes to get down a concern in Ghana, hence under this subdivision I will besides supply information or penetration in relation to what processs needed to follow when puting up a concern in Ghana.

2.0. Economic Overview of Ghana

The Republic of Ghana is a West African state with land country of 92,100 square stat mis, which is boarded by Cote D’Ivoire, Burkina Faso, Togo and Gulf of Guinea.

Ghana has ever been known as a state of great natural resources, therefore the moniker, “ The Gold Coast ” . Ghana is rich in gold, lumber, diamond and chocolate and has an economic system that is to a great extent dependent on agribusiness. Ghana remains one of the taking manufacturers of Gold and Cocoa in the universe. Agribusiness in Ghana histories for 37 % of GDP and employs an estimated 55 % of the national work force. It must nevertheless be noted that agribusiness is still mostly little graduated table, non- commercial and non mechanized.

Ghana ‘s economic system is one of the most stable and fast turning economic systems in Africa and has achieved impressive growing as a consequence of the find of oil and natural gases. With such impressive growing and comparative stableness in the macro-economic indexs, Ghana attained a lower middle-income economic system position harmonizing to the World Bank, nevertheless youth unemployment and poorness continues to be a major issue. 25 % of Ghana ‘s young person are unemployed and 37 % of the population presently lives on less than $ 1.25 a twenty-four hours.

Despite a 14.4 % growing in Ghana ‘s economic system in 2001 harmonizing to the World Bank, Ghana ‘s external debt over the last 3 old ages has increased by 125 % from $ 8 billion in 2008 to $ 18 billion in 2011.

In footings of investing, Ghana has Africa ‘s 3rd largest stock exchange with South Africa and Nigeria in front of Ghana severally.

2.1 Economic Performance and Outlook

Ghana ‘s economic public presentation over the last decennary has been impressive. GDP mean one-year growing rate was 6 % between 2005 and 2007, increased to 7.3 % in 2008 but nevertheless declined to 3.9 % in 2009 on the dorsum of the planetary fiscal and economic crisis.

Inflation increased by 41.7 % from 12.7 % in 2007 to 18.1 % in 2008 nevertheless due to effectual economic policies and asceticism steps rising prices for the last 3 old ages has steadily falling to its current rate of 9 % as at 2011 for the last 9 months since. Increase in non-oil imports and income escapes widened Ghana ‘s current history shortage by some 38 % at the terminal of 2011.

Despite these challenges, Ghana ‘s economic system has outgrown the planetary economic system for the past 4 old ages. Whilst the planetary economic system grew at an one-year mean rate of 3 % , Ghana ‘s one-year mean growing rate has been 6.5 % .

The acceptance of asceticism steps to cut public disbursement and the stableness of macroeconomic indexs have helped Ghana survive likely the worst portion of the planetary economic meltdown and it remains one of the most promising economic systems in Africa. Based on the indexs above on the economic wellness of the state, Ghana ‘s medium-term growing remains positive, mostly driven by investings in the excavation industries, public substructure and commercial agribusiness harmonizing to the World Bank.

2.2 Development of Pensions Scheme in Ghana

Pension systems in Ghana day of the month as far back as the colonial epoch. The first sort of pension system was introduced in Ghana in 1946. The pension system was a non-contributory pensions strategy and its purpose was to provide to the retirement benefits of those who worked within the colonial disposal and besides included mine workers. Kpessa ( 2010 ) noted that Ghana ‘s societal security system at the clip was designed, as a agency of promoting trueness and efficiency within the colonial service as a consequence was rather sole. Like most plans introduced during this epoch, old age income protection policies were limited to urban inhabitants particularly Europeans and a few Africans working in the colonial bureaucratism.

It was non until 1950, the Pension Ordinance No.42 ( Cap 30 ) and Superannuation strategies was established in an attempt to hold a societal security system in topographic point that covered a greater part of Ghanese workers. It was established as a pension strategy for public retainers in the Gold Coast. These strategies covered certified instructors, University lectors and all authorities workers nevertheless a huge bulk of Ghanaians were unable to profit from this strategy ( Adjei, 2000 ) .

In 1965, the Social Security Act ( No. 279 ) was passed to cover all private and public sector workers who were non covered under the Pensions Ordinance No.42. The strategy ab initio started as a provident fund, supplying benefit for old age, invalidness and subsister benefit. This Act was repealed and the societal security and national insurance act ( SSNIT ) was established under NRCD 127. The trust was established to administrate the new societal security strategy.

The strategy was subsequently converted to a societal security pensions strategy and in 1991 turned into a defined benefit strategy following the passage of the Social Security Act 1991 conveying some degree of adequateness into workers pensions.

For a worker to measure up for old age benefit, the worker must hold worked for a lower limit of 240 months and be at least 60 old ages of age. Workers in the extractive industries such as excavation nevertheless have a compulsory retirement age of 58 old ages under which they qualify for old age benefits.

For workers who have been injured at work, they may measure up for payment under the invalidness benefit subdivision of the societal security system. Benefit is collectible over a period of 12 months.

If a retired person dies before making the retirement age his or her benefit is calculated as the present value of all parts and paid to the lasting partner or dependants.

The Social Security and National Insurance Trust ( SSNIT ) has four major maps:

Collection of parts

Record maintaining – maintaining up to day of the month records of all lending members

Processing and payment of benefits

Pensions fund direction

2.3 Overview of Social Security/ Pensions in Ghana

A cosmopolitan societal security/ pensions scheme in Ghana has non been in being for so long holding been established in the 1990 ‘s ; earlier signifiers of societal security were sole. The Social Security Pensions Scheme ( SSPS ) was established in 1991 under the Social Security Law PNDCL 247 and under the trust territory of the societal security and national insurance trust ( SSNIT ) .

Twenty-five old ages prior to this, Ghana run a provident strategy established under the societal security act of 1965 ( Act 279 ) .

Under the 1991 strategy, the Social Security and National Insurance Trust collected the parts of the Ghanese worker. The Act provided for mandatory coverage for workers in constitutions that employ at least five workers. An constitution with less than five employees had the option to fall in the strategy, but there was no irresistible impulse ( Kumado & A ; Gockel, 2003 ) . However, the undermentioned classs of workers, although they employed more than five individuals, were exempt by jurisprudence from fall ining the strategy ;

members of the Armed Forces, the Police Service and the Prison Service ;

Foreigners in the diplomatic missions ; and

Senior members of the universities and research establishments.

Support of defined part strategies is based on parts made by the employer and the employee on behalf on the employee. These parts are invested and when the employee reaches retirement age, becomes for good incapacitated or dies anterior to retirement ; the entire parts together with returns on the investing are paid as a ball amount to the employee or his/her dependants ( Kpessa, 2010 )

Under the strategy the Ghanese workers entire part constitutes a sum of 17.5 % of his wage to the strategy towards his pension and the part construction is designed as follows:

Employees – 5 % of employee ‘s wage

Employer – 12.5 % of employee ‘s wage

Entire Contribution – 17.5 % of employee ‘s wage

Under Ghana ‘s pension strategy there are three basic benefits, which include Old Age Pension, Invalidity Pension and Death Survivor Payment. Pension benefits in Ghana are indexed yearly utilizing the mean rate of addition in the parts inflow from the old twelvemonth. This is done to forestall any deformations in the fiscal equilibrium of the strategy.

In order to measure up for benefits under the pensions scheme one must run into the eligibility demand and sums collectible under each subdivision are as follows harmonizing to the Social Security and National insurance Trust:

Old Age Benefit

To measure up for old age full pension payment, a worker should hold contributed to the strategy for a lower limit of 240 months, which is tantamount to 20 old ages, and should hold attained either the voluntary retirement age of 55 or compulsory retiring age of 60. The jurisprudence applies otherwise to individuals who have worked in risky conditions such as the mines. Such classs of workers under the jurisprudence qualifies for a full pension at the age of 55 provided the worker has been engaged in such work for 240 months or more.

The minimal pension payable is 50 % of the norm of the 3 best old ages salary for a minimal part period of 240 months. For any extra month served after the 240 months, a worker earns a pension right of 0.125 % , i.e. 1.5 % for every 12 months in add-on to the 50 % start off. Thus, a worker can theoretically gain up to 80 % pension when he shall hold worked and contributed to the strategy for 40 old ages.

As earlier mentioned, workers who opt for early retirement at age 55 or retire anytime before they are 60 old ages are entitled to a reduced pension. Profit due is calculated on an increasing graduated table from the age of 55 old ages, significance that those who retire closer to the statutory retirement age receive a higher per centum of their full pension than those who do n’t. Percentages of full benefit due are as follows:

Age 55, 60 % of full pension ; 56, 67.5 % of full pension ; 57, 75.0 % of full pension ; 58, 82.5 % of full pension ; 59, 90.0 % of full pension.

Pensions are paid monthly, nevertheless retired persons have an option of having payment in progress equivalent to 25 % of 12 old ages pension as a ball amount and later be on a reduced pension.

If a worker before achieving the age of 60 is unable to hold contributed the minimal 240 months to the strategy he is entitled to have all his existent parts plus involvement at half the prevalent involvement rate on authorities exchequer measures.


With respect to subsisters profit, if a subscriber dies while still a member, his dependants measure up for a lump amount of the earned pension. When a member contributes to the Fund for 240 months before deceasing, a ball amount equal to the value of his pension for 12 old ages shall be paid to his subsisters. If a member dies without holding contributed to the fund for 240 months, the payment to his subsisters will be his relative pension for a period of 12 old ages. Where a member who has retired dies before he is 72, his subsisters will be paid in ball sum the unexpired pension up to age 72.


To measure up for invalidness pension, a member shall hold contributed to the Fund for 12 months within the last 36 months before going invalid. In add-on, the member should hold been certified for good invalid and incapable of paid employment by a medical board including

2.4 Parallel Pensions Scheme

One may be tempted to believe that the pensions scheme being administered by the Social security and national insurance trust covers all workers in Ghana, nevertheless as indicated above some subdivisions of the working populace are exempt from the national pension strategy. This is because such workers are covered under a different pensions strategy with pre-dates the national pensions strategy.

The strategy, which is dearly, called CAP 30 ( name derived from Chapter 30 of the Pension Ordinance of 1946 ) provides pensions for Civil Servants and the Armed Forces and some instructors. Today there are still members of these working sectors who are covered under CAP 30. Such members contribute 5 % of their pre-tax wage, which is however non saved but recycled into the Consolidated Fund. However, it is still a non-contributory program for the armed forces, the constabulary, and the prisons services. These employees take place all of their net incomes ; no tax write-offs for pension coverage. This aside there are other characteristics of the CAP 30 that offers superior value as compared to the Social Security and National Insurance Trust including:

10 old ages for full retirement vs. 20 at SSNIT ;

70 % of concluding wage compared to 50 % of norm of three highest old ages ‘ wage at SSNIT

CAP 30 pension payments are indexed yearly to current salary graduated tables

Ghana ‘s societal security system lacks coherence as evidenced in the disparities that exists under the SSNIT and CAP 30 an there is an pressing demand for the harmonisation of the societal security system in Ghana by replacing the current systems with a comprehensive all inclusive system

2.4 Pensions Reform in Ghana and overview of National Pensions Act 2008

Over the old ages concerns have been raised about the disparities and apparently greater benefit under the CAP 30 as compared to the Social Security and National Insurance Trust ( SSNIT ) pensions strategy. Public sector workers further agitated over the insufficiencies of the current societal security benefits and its inability to prolong a respectable life during retirement. Furthermore, the current societal security system has failed to include those in the informal sector who constitute about 80 per centum of the working force.

The route to societal security reform in Ghana began in July 2004, to supply a cosmopolitan pension strategy for all Ghanese workers following the agitations described above which lead to the drafting and passing of the National Pensions Act 2008. The Act is divided into four parts ; the first portion negotiations about the constitution of a National Pensions Regulatory Authority that will be responsible for the ordinance of pensions strategies in Ghana every bit good as a three-tier contributory pensions strategy.

The 2nd portion trades with the basic national societal security strategy ; Part Three provides for occupational pension strategies, provident fund and personal pension strategies and direction of the strategies and eventually the general commissariats of the Act is contained in portion four.

Harmonizing to the Social Security and National Insurance Trust, under the new Pensions Act 2008, there is a three tier contributory strategy, which replaces the current Social Security Pensions Scheme and CAP 30. Under the new strategy a entire contributory sum of 18.5 % of a workers monthly wage will be paid towards their pension and this is distributed between the first two grades. The first two grades are compulsory and the 3rd grade is voluntary. Below are the characteristics of each grade:

First Tier

The first grade is the basic national societal security strategy, which incorporates an improved system of SSNIT benefits. This grade is compulsory for all employees in both the private and public sectors. The compulsory basic national societal security strategy is to be managed by SSNIT.

Contribution to the first grade will be 13.5 % of an employee ‘s monthly wage. Whilst this grade is compulsory for all employees in the public and private sectors, freelance members of the working category have an option to fall in the strategy and are under no duty to make so. Of the 13.5 % , 2.5 % will be deducted and transferred to NHIF.

Benefit due under this grade will be calculated utilizing the norm of the highest 3 one-year wages A- 50 % +1.5 % of every extra 12 months contributed. A subscriber under the first grade can non be less than the age of 15 and non older than the age of 45 old ages when fall ining the strategy.

Second Tier

The 2nd grade is occupational ( or work-based ) pension strategy and it is a compulsory strategy for all employees, nevertheless this grade will be in private managed. This grade was designed chiefly to give subscribers higher ball amount benefits compared to what is soon available under the SSNIT or Cap 30 pension strategies. A sum of 5 % of an employee ‘s monthly salary shall be allocated to the 2nd grade provided the employee falls within the age bound stipulated under the first grade.

If the worker nevertheless, falls outside the declared age bound, all of the 18.5 % part shall be transferred to the 2nd grade. The voluntarily provident fund and personal pension strategies are to be managed by sanctioned legal guardians, licensed by a National Pensions Regulatory Authority and pension fund directors and keepers, licensed by the Security and Exchange Commission and registered with the Authority.

Under this grade a defined benefit is collectible to a retired person, partner or dependant after expiration of service, retirement or decease.

Third Tier

The 3rd grade is a voluntary provident fund and personal pension strategies, which provides revenue enhancement benefit inducements for workers who opt for this strategy in add-on to the first two. As earlier mentioned, the old pensions strategy was comparatively sole and did non supply screen for 80 % of Ghana ‘s working population. The debut of the 3rd grade is an attempt to turn to the issues refering the old pensions system, which by design excluded those in the informal sector and did non supply avenue for the people to set up their personal pensions in add-on to the province pension. The purpose of the 3rd grade therefore I believe, was to supply those in the informal sector to hold their hereafter secured by lending to a private strategy and besides provide those already covered under the national strategy to augment their bing benefits should it still be seen as inadequate.

This grade is to the full funded and is besides in private managed by accredited legal guardians that will desire to supply private pension strategies.

2.5 Administration

A National Pensions Regulatory Authority ( “ the Authority ” ) has been established to modulate both public and private pension strategies in the state. The Authority will O.K. , modulate and supervise Trustees, Pension Fund Managers, Custodians and other establishments associating to pension affairs.

To guarantee that subscribers ” involvements are adequately protected, the National Pension Act has in-built precautions. These include stringent blessing and enrollment standards by the Pensions Regulatory Authority ; separation of maps of Trustees, Fund directors and Custodians ; on traveling monitoring among several others.

Trustees licensed by the Authority would be required to take out equal insurance to indemnify scheme members against any losingss of scheme assets caused by malfeasance or misconduct of the legal guardians or their service suppliers.

Among other impacts, the new strategy will guarantee improved life criterions of the aged ; fiscal liberty and independency of retired persons ; increased national nest eggs and handiness of long-run financess for economic development ; and the Promotion of growing and development of the capital, mortgage and insurance markets.


3.1 Background

In 2004, the authorities of Ghana started the procedure of reforming Ghana ‘s pensions system and in 2008 passed the National Pensions Act 2008, which saw the birth of a new pensions system in Ghana, the constitution of a new pensions regulative organic structure and most significantly the engagement of the private sector in the bringing of societal security in Ghana.

The chance presented through the National Pensions Act 2008, is what has motivated me to compose this concern proposal for the constitution of a pensions trust in Ghana to take part in the 3rd grade of Ghana ‘s pensions System.

The new pension strategy will consist two compulsory strategies and a voluntary strategy as follows:

First grade which is a compulsory basic national societal security strategy will be managed by the Social Security and National Insurance Trust ( SSNIT )

Second tier occupational ( or work-based ) pension strategy will besides be compulsory for all employees but in private managed by sanctioned and licensed legal guardians

Third tier voluntary provident fund and personal pension strategies, supported by revenue enhancement benefit inducements to supply extra financess for workers in both the formal and informal sectors who want to do voluntary parts to augment their province pensions benefit.

The Second grade and the voluntary 3rd grade will be in private managed by sanctioned legal guardians licensed by the Pensions Regulatory Authority with the aid of pension fund directors and keepers registered by the Authority. It is within the 3rd grade that a concern chance exists for the constitution of a legal guardian company that will supply pension merchandises to persons and organisations in Ghana.

3.2 Benefits of the New Pensions Scheme

The new pension strategy offers a figure of benefits above the old system. Harmonizing to the Social Security and National Insurance Trust ( SSNIT ) , workers within the formal and informal sectors stand to profit from the following under the new pensions strategy:

Provision of Old-age pension:

Decrease of part period from 240 months to 180 months

Full benefit increased from 50 % of the norm of the highest three old ages net incomes to 80 %

Provision of health care premium for all subscribers to societal security pensions strategy

Occupational Scheme: provides lump sum benefits to subscribers after achieving the age of 50 old ages.

Survivors benefit computations increased from 12 to 15 old ages

Using ball amount benefits under the 2nd grade to procure mortgages intending workers can obtain their ain houses by utilizing their ball amount benefit as collateral

Better controls over personal pensions under the 2nd and 3rd grade

Provision of an avenue for informal sector workers who have been neglected under the old pension system to achieve a pensions

3.3 Business Description

The private pensions industry is a new and untapped industry in Ghana. The constitution of this industry has come about following extended attempt by the Government of Ghana to reform the societal security system in Ghana with the debut of a new three-tier system.

Under the new three-tier system, private engagement in the bringing of societal security is made possible under the 2nd and 3rd grades which will be managed by private entities as either pension fund directors and keepers or as a legal guardian company severally.

Under the Act, three chief concerns has been created for private engagement:

Trust Servicess

Custodian Servicess

Fund Management

The proposed concern will seek to supply private pension programs to persons and organisations that want a more comprehensive and equal societal security program in add-on to the province pension. The house will besides function informal clients who have been left out under the national pensions strategy and freelance persons who may desire to get down a pension program for themselves.

The proposed company will be setup as a legal guardian company to the full licensed by the national pensions regulative authorization to supply private pension strategies, the proposed concern will besides run custodian and fund direction services.

The custodian services and fund direction facets of the concern will be outsourced to Ecobank Ghana Ltd and Ecobank Development Corporation ( EDC ) severally as a consequence of their huge operational expertness on the African continent.

3.3.1 Products and Services

The proposed concern will be offering the undermentioned merchandises and services:

Tier 2 Occupational Pension Scheme

Tier 3 Provident Fund Scheme

Pension Fund Administration Services

Custodian Servicess

Tier 2 Occupational Pension Scheme

This is a compulsory part strategy and this merchandise will supply balls sum payment to the retired person upon making the retirement age or to the nominative donee should the retiree/ subscriber dice before the retirement age.

Merchandise Features

Lump sum payment at retirement

No option for backdowns of any sort until subscriber has reached retirement age

5 % of employee ‘s gross wage is contributed to the pension fund


Asset based fee of 2.4 % per annum

Tier 3 Provident Fund Scheme

This merchandise acts like a nest eggs strategy with the purpose of accessing the nest eggs made at retirement. Benefits under this strategy will be paid to the subscriber, beneficiary or legal guardian nominated by the subscriber in the event of the subscribers death.

The merchandise has the undermentioned characteristics:

option to retreat in conformity with lending companies regulations and ordinances

revenue enhancement alleviation inducement of up to 16.5 per cent of gross wage

option of farther increasing pension entitlement with the handiness of extra voluntary parts


Asset based fee of 2.4 % per annum

Pension Fund Administrative Servicess

Under this merchandise we provide services that makes entree to and pull offing single personal pensions easy and dependable. We offer the undermentioned services to our clients:

Monthly e-statements and paper statements

Online entree to pension histories of each person

Call centres and helplines to turn to any questions or questions on single pensions

Prompt claims payment and first-class client service


We provide all of the above for a little plus based fee of 0.8 % per annum

3.4 Mission and Vision Statement

The proposed legal guardian company ‘s vision is to go the first private pension service supplier in Ghana. As such a mission statement has been chosen to reflect this vision.

The proposed concern mission is:

“ To supply advanced and low-cost merchandises, designed based on market demand and demands, delivered with a high degree of service quality by a motivated and professional squad with the purpose of transcending the outlooks of clients, stockholders and all stakeholders ”

3.5 Aims

Our primary aims over the first three old ages of operations include:

Establishing a trade name which is associated with or known for its advanced and low-cost merchandises delivered with first-class client service

Addition and function 30 % of the private pensions market over the first three old ages of operations with an one-year addition of 5 % in market portion

Design, physique and implement an efficient and cost effectual distribution system that besides meets the outlooks of clients

3.6 Location and Facilities

The proposed company will be based in Ghana ‘s capital Accra, specifically within the Airport residential country. This location was chosen every bit ideal as it presents easy entree to the country from any portion of the capital metropolis.

The proposed concern will get down operations in rented adjustment and within three old ages get its ain lasting adjustment. The proposed company will non hold physical subdivisions in other parts of the state when it commences concern but will hold representative offices within spouse offices. Some of our spouses will include Bankss, rural Bankss, NGO ‘s and micro finance establishments. This scheme was opted for to cut down the capital demand needed to get down operations. The proposed concern purposes to hold the undermentioned installations available at the start of operations:

Fully furnished offices

Computers and laptops for staff and direction severally


Working phone and facsimile lines

6 company vehicles

Security and Fire Systems


Minimal operations package as required under the National Pensions Act 2008

3.7 Targets and Specific Goals

We have set the undermentioned marks and ends over the following 3 old ages of operations:

Achieve a 5 % market portion within one twelvemonth of beginning and have at least 30 % of entire market portion by the terminal of the first five old ages

Have a net net income of 0.10 by terminal of twelvemonth five

Increase entire plus base by an mean 15 % per annum


The following have been identified as factors, which may militate against the smooth accomplishment of the planned marks and specific ends:

Depreciation of cedi can impact buying power of targeted client base

Higher rising prices rates

Competition and obstructions in market incursion

Lack of assurance and negative perceptual experience about pension concern ensuing from clients experience with the Social Security and National Insurance Trust ( SSNIT )

Addition in adult male power cost as a consequence of the deficiency of expertness within the pensions industry

3.8 The Market

Evidence provided in earlier chapters points to the fact that Ghana ‘s old societal security system did non turn to the retirement demands of workers. One of the jobs has been SSNIT ‘s inability to lasso in workers in the burgeoning informal economic system. Farmers, fishermen, seamsters, hairstylists, market adult females and bargainers every bit good as drivers and other freelance Ghanaians can now take part in a pension strategy which will guarantee that workers in the informal sector, like their opposite number in the formal sector, besides receive monthly pensions every bit good as entree a ball amount which will take attention of them in their old age.

This has been made possible by the proviso of a Voluntary Personal Pension in the Third-Tier in Ghana ‘s new pensions Act to provide for curious demand of worker peculiarly in the informal sector who constitutes about 85 per cent of Ghana ‘s work force. The work force, which harmonizing to the 2000 nose count was about 12 million, is estimated at 13 million presently out of which merely 1million constitutes a formal sector. The informal sector therefore presents a immense untapped pension concern under the 3rd grade whilst the formal sector constitutes a possible market for private pension strategy under the compulsory 2nd grade.

3.8.1. Market Cleavage

Our mark market consists of two distinguishable classs viz. Rural Profile of our mark market consists of the undermentioned features:



The informal sector workers are our chief mark market with the formal 2nd grade market being our secondary mark market. The informal market has been selected as the chief mark market for the undermentioned grounds:

Informal sector workers constitute a high proportion of Ghana ‘s work force population ; an estimated 12 million harmonizing to the 2010 national nose count

The deficiency of a pensions strategy for these group of workers motivates them to utilize private pension strategies as an option to the populace or national pensions strategy which has over the old ages excluded the informal sector workers

There is new enthusiasm for private pensions scheme within the general work force population with the hope that private pensions will supply better retirement bundles than the national pension strategy has provided since its origin

Generous growing in the population of informal sector workers which would offer the proposed concern generous growing if such clients are efficaciously targeted and served

The formal sector workers are besides our secondary mark market and offer some benefit for the proposed concern. We besides target this market for the undermentioned grounds:

Smaller growing but stable mark group

Premium aggregation is easier and consistent

Better grasp of private pensions scheme

3.8.2 Target Market Segment Strategy

In order to take full advantage of our mark market our selling scheme will concentrate on making consciousness, bring forthing involvement and efficaciously distributing of the merchandises and services we offer. Our client base consists of formal and informal working population.

Informal Workers:

Informal workers are the dominant portion of our mark population representing 90 per cent of mark market. These consists of workers aged between 18 and 70 old ages nevertheless our mark market out of the entire market are informal workers between the ages of 16 old ages and 45 old ages. This population was targeted because they will run into the minimal contributory mark of 180 months before retirement. For the informal workers located both in urban and rural countries the best manner to make consciousness is through local wireless Stationss, particularly those who operate utilizing the native linguistic communications. This is because for rural countries of Ghana particularly where most informal workers are found wirelesss are the chief enlightening appliances. Radios are besides rather common amongst urban inhabitants every bit good and turn out to be the most effectual manner of making consciousness and marketing our merchandises and services.

For effectual distribution, Microfinance establishments, NGO ‘s, rural Bankss and recognition brotherhoods are the most effectual manner of administering merchandises to informal workers. This is because most informal workers are excluded from the mainstream fiscal services and most normally use rural Bankss, microfinance establishments and recognition brotherhoods for their fiscal demands. NGO ‘s who besides work in these rural countries have relationships with the people in those rural countries and have a huge web that the proposed concern can leverage to their advantage. There is besides an already bing trust with these establishments ; this makes utilizing these distribution channels even easier and more advantageous to the proposed concern.

Formal Workers:

Formal workers from an of import portion of our mark market, though relatively they constitute a smaller part of the market. They represent a stable subdivision of our market with higher regular wages. Within this mark group the targeted age group is besides between the ages of 16 old ages and 45 old ages. For formal workers a mix of schemes demands to be used to make the coveted consciousness, chiefly a combination of wireless, telecasting and newspaper selling. These are the most effectual consciousness creative activity tools available for this subdivision of workers. For effectual distribution on the other manus, most of these workers have entree to formal fiscal services hence the Bankss and employees of these formal workers will be the chief distribution channel for our merchandises and services.

3.8.3 Market Tendencies

The private pensions scheme market will dwell of the compulsory grade 2 ( which is 27 % of the compulsory pensions strategy ) and voluntary grade 3 strategies. The private pension industry is expected to turn at an one-year rate of 8 % based on the one-year rate of the national pensions strategy. It is assumed that growing within the private pension industry will be mostly due to the dissatisfaction of the national pensions strategy that has resulted in many subscribers looking for an option, the desire for an addition pension payments and revenue enhancement incentives the 3rd grade offers subscribers. Furthermore workers who have traditionally been excluded from the national pensions strategy who now have the chance to hold a pension program will besides drive growing.

The overall success of the concern is dependent on the undermentioned factors:

Health of national economic system: the private pensions scheme peculiarly the 3rd grade will execute at its best when the economic system is good. With a healthy economic system workers earn more and rising prices is low hence workers can salvage money to put in their hereafter. Besides when their wages increase their parts to the 2nd grade besides increases as the sum contributed is a per centum of the workers wages

Handiness and demand based merchandise design: growing and success of the private pension industry will depend on how easy the merchandises can be assessed by the mark market and how best these merchandises meet the demands of the mark market

Making consciousness: effectual consciousness that is n’t limited to doing the merchandise known but besides creative activity of awareness whereby such awareness makes the mark market understand the demand for such merchandises.

3.8.4 Market Growth

The figure of formal workers is expected to increase by 5 % yearly with informal workers increasing by between 10 – 20 per cent yearly. The majority of the proposed concern market growing is expected to come from the informal sector mark market that has an mean one-year growing of 12 per cent. This is peculiarly because this subdivision of the mark market is has been traditionally excluded from any pensions plan and the handiness of a private pensions as an option will drive growing. It must be noted nevertheless that due to the curious features of this mark group growing will be less stable peculiarly due to irregular income flows. The formal mark market is expected to supply stable growing for the proposed concern. This subdivision of our mark market is comparatively easy to track in footings of premium aggregation and has seen an mean growing of about 8 per cent growing in parts to the national pensions. We are presuming that such growing figures will reflect in the grade two compulsory strategy.

3.8.5 Market Needs

The proposed concern will give its clients the chance to procure their hereafter through the proviso of pension merchandises that meet their existing and future demands. Clients have the option of take parting in a private pensions plan in add-on to the national pension strategy to profit from the generous revenue enhancement inducements it provides every bit good as to augment their pension entitlement.

We have identified the following demands within our mark market that we strive to run into:

Opportunity to take part in a pension strategy

Active engagement in the finding of their pension entitlement

Higher pension payout

Assortment in the pick of pension merchandises

Pension merchandises designed based on the demands of the clients

Prompt and convenient service in the country of pension updates and claiming

3.9 The Industry and Potential Rivals

The trust territory under the private pensions industry is most likely to be dominated by legal guardians set up by life insurance companies. Ghana presently has seventeen ( 17 ) life insurance companies and the market leaders in footings of market portion are:

SIC Life

Enterprise Life Assurance Company ( ELAC )


Star Life

Vanguard Life

These companies presently have a broad coverage and keep a immense sum of corporate clients, which is cardinal, because under normal fortunes corporate hazards and pension programs of these corporate clients will be given to the life insurance supplier of the companies.

3.9.1 Competitive Strategy & A ; Competitive Edge

The first competitory advantage of the proposed concern will be its declared capital. With the purpose of holding a province capital of about GHS 3 million we hope to put ourselves in a place where our sound fiscal standing will supply us the chance to pull off a larger part of the tier two compulsory strategy. We believe that sound fiscal terms will supply our possible clients the assurance that we will be able to pay their claims. Our 2nd competitory advantage will be our web of concern spouses who will enable us efficaciously do our merchandises available to our mark market. When we make usage of the distribution channels of our concern spouses our merchandises and services will efficaciously go the most accessible within the industry. Finally our trade name and repute as being client friendly and client focused will besides assist us inch in front of our rivals as we aim to react rapidly to altering demands of our mark market by giving chance to our clients to give us changeless feedbacks and suggestions on our merchandises and services.

To enable the proposed company compete and take full advantage of the market to achieve its aims the following strategic options have been identified:

Make usage of external expertness in pensions direction to construct internal capacity

Leverage distribution channels of our concern spouses on the pensions operations

Make it a point to pull and retain corporate clients and persons through first category client service and demand based merchandise designs

3.9.3 Selling Scheme

Our selling scheme seeks to set up the proposed concern as the preferable pick for people in demand of a private pension program. Our selling scheme will concentrate on our demand based merchandise design and first-class client service. We aim to allow our client base see us as their spouses in procuring their hereafter financially.

Our selling scheme will be based on our superior public presentation in the undermentioned countries:

Assortment of merchandise pick to accommodate each persons demands

Overall quality of merchandise and service

Excellent client service and support

Supplying prompt information and feedback on persons pension

Easy entree to each persons pension program

Our selling scheme will make consciousness and generate involvement in our merchandises within our mark market.

3.9.4 Operational Software

The proposed concern operations will be run automatically with the aid of pension disposal package, in conformity to the package specifications outlined in the National Pensions Act 2008. The installing and preparation will predate beginning of operations.

3.9.5 Management Team and Personnel

The direction squad will dwell of the CEO, GM Operations, GM Finance and Investments, SM Gross saless and Marketing and SM Administration and Human Resources. Key forces needed for operation of concern in the first twelvemonth will include:

Chief Executive Officer

General Manager Operations

General Manager, Finance and Investment

Senior Manager, Gross saless and Selling

Senior Manager, Administration and Human Resources

Two pensions specialist

Two operations officers

Two back office officers Management Team Profile:

3.9.6 Analysis of Strengths, Weaknesses, Opportunities and Threats of market


Comprehensive Law refering pension

Being of appropriate pension regulative organic structure


Lack of proficient staff

Inadequate response to altering client demands and outlooks


Untapped formal 2nd grade market

Handiness of big informal market

Cross selling chances to clients of our spouses


Competition signifier life insurance companies

Lack of equal pension cognition

Public ‘s misgiving of SSNIT and its reverberations on the private pensions market

Economic down bend and high rising prices

Chapter 4- FINANCIAL Plan

Sound fiscal terms of any new venture is of import for the success of the concern. Under the fiscal program chapter, I hope to turn to inquiries in relation to how the concern will be funded, give an thought of the possible grosss the concern may bring forth every bit good as supply an penetration on the premises made. The fiscal program will cover the undermentioned:

Funding the concern

General and Financial Assumptions

Projected Cash flow

Projected Balanced Sheet

Projected Net income and loss

4.0 Funding the concern

The concern seeks to procure support from four chief beginnings:

Investing from spouses

Private investors

Assetss Finance

Bank loans/ recognition installation

Investing from spouses:

Investing from each spouse is non merely the easiest manner of support this concern but besides the cheapest manner. Each spouse is to put an sum of GHS90,000.00 each stand foring a little part of concern ownership.

Private investors:

We opted for private investors as this subdivision of investors invest in specific industries. Unlike the Bankss who may non understand the sort of concern this may be and truly understand its possible, private investors specialized in private pension support are most likely to understand the concerns better and the degree of hazards involved. This in consequence can do borrowing cheaper as they will non enforce a higher involvement premium because they may overrate the hazards involved with the concern. We will raise GHS 1,500,000.00 from private investors by selling portion of the ownership of the house to them.

Assetss Financing:

We will utilize plus funding for the relevant assets that he house will necessitate in its operations. Asset funding will assist the proposed concern salvage some money for other investing chance, as it will enable the steadfast entree cardinal assets without shooting hard currency into capital investings all at one time. This will cut down get down up costs. The undermentioned assets is expected to be acquired through assets funding:

Company vehicles

Office equipment

Bank Loans:

Bank loans will do up our debt funding. We are anticipating to hold a recognition line of up to ?100,000.00 at a negotiated involvement rate. We opted for a recognition line instead than fixed loan sum because until the recognition line is used we need non pay involvement salvaging money on involvement payments, furthermore it serves as exigency financess and will non sit on our books as debt until we entree it.

4.2 General and Financial Assumptions

The undermentioned premises will find the potency for the proposed concern:

The new company will presume 15 % of the 2nd tier compulsory pension fund and increase to 10 % , 15 % , 18 % and 20 % for 2012, 2013, 2014, 2015 and 2016 severally.

It is further assumed that 20 % of our portion of the market will hold a 3rd grade strategy in topographic point and that 50 % of them will out-source to us

We will pay 1 % and 0.5 % severally to fund directors and keepers

Corporate Tax rate will stay at 25 %

4 % of the fund from the 2nd and 3rd grade will come to us by manner of gross fees. Detailss of fees are detailed below:

Old ages

Projected Contributions

Fund Assumed

Market Share

3rdTier Provident Fund

Entire Fund

4 % Fees




































It is assumed that SSNIT will turn at an one-year rate of 28 % based on the existent mean growing of SSNIT between 2002 and 2010 and entire parts will increase from 17.5 % to 18.5 % harmonizing to the new jurisprudence.

The company will manage both the trust territory and the disposal of the fund and outsource the keeper and fund direction services

Staff cost and other disbursals in 2013 is expected to travel up by 20 % from the 2012 budget figures and a farther increase in staff Numberss

4.3 Projected Fiscal Statements:

4.3.0 Income Statement

The proposed concern experiences loss during the first three old ages of operation but records a net income from the 3rd twelvemonth growth by 912 % between the Forth and 5th twelvemonth.

Graph demoing Net Income of Proposed Business

Cash flow Statement


In the concluding chapter I will reason by foregrounding some of benefits of a in private managed pensions scheme on Ghana ‘s economic system and for its consumers. I will besides foreground my findings as a consequence of transporting out this proposed concern program.

5.1 Exit Scheme

Exiting the concern is every bit of import as planning for it. We are cognizant of the fact that our investors may at some point want to go out the concern and reimburse their investing. It is our hope that our investors and spouses will be willing to run the concern every bit long as possible before choosing out of the concern. After making a successful concern investors and proprietors of the proposed concern may go out the concern utilizing the undermentioned agencies:

Selling of equity:

Each investor has an option of selling off their equity portion in the concern to either the concern or to any establishment or investor willing to take up those portions. This offers the investor an easy manner to go out the concern every bit good as an option to sell whatever proportion of their involvement they are interested in allowing spell of. Aside being an easy option it gives the investor an option of still keeping on to a portion of the house no matte how little as against an outright sell which may go forth the investor out of the house wholly. For any investor who wishes to sell their equity interest it must be noted nevertheless that the concern has the first option to purchase those portions before any 3rd party.

Outright Sell/ Acquisition:

If investors and proprietors after making a successful concern want to wholly go out the concern there is an option of selling the concern outright to an establishment or investor who may be interested. Under this option investors may no longer hold any claim to the concern and there is a possible to be paid below the value of the house. There is besides a possibility that the concern may be overestimated and investors may have a batch more on their investing.

An outright sell may on the other manus provide an easy and clean issue for investors and investors may hold an option of still keeping some equity in the concern as portion of the trade.

Traveling Public:

Traveling public even though available, as an issue option may non be the easiest manner out of the concern. This is because IPO ‘s return clip and the concern may non hold what it takes to travel public within the clip frame that some investors may desire to choose out of the concern. Furthermore an IPO may be the company a batch more money than it may be able to afford and may non raise the money it may mean to raise. The market may besides undervalue the true value of the house which will intend that should the house go public there is the possible or the houses portions to merchandise at a value far less than the true value of the house.

In the event that the proposed concern is non successful, the proprietors of the proposed will guarantee that all investors recoup every bit much if non all of their investing as possible without harm to all parties involved. In the event that concern is unsuccessful, the assets of the proposed concern will be sold off to pay off all investors.

5.2 Benefits of proposed concern on the Ghanese Economy

The ultimate purpose and duty of every state is to protect its citizens and one of the ways the province does this is through societal security and the proviso of a pension to protect the fiscal wellness of its citizens. The province in its attempts can non ever run into the demands of the citizens as the province provides merely the barest minimal pension strategy. For this the importance of a in private managed pensions strategy is of import to any economic system particularly for developing economic systems. Privately managed pensions fund provides some benefits to both the economic system and the subscriber. Sing the many jobs being experienced by the national pensions provider the importance of a private pensions supplier could non hold come at a better clip for the Ghanese worker. It is my hope that this concern proposal will assist run into the demands of the Ghanese worker in procuring their fiscal hereafter.

Some of the benefits my proposed concern will convey to the Ghanese economic system and the pension subscribers include:

Better control of pension entitlement and higher flexibleness:

One of the benefits the proposed concern will supply its clients is the chance to better command their pension entitlement. With a private pension the subscriber, in add-on to the national or public pension strategy, can hold entree to extra pension benefit under the private strategy. Furthermore since the private pension provides some revenue enhancement inducements it farther reduces the revenue enhancement loads of subscribers and subscribers can lend as they want and are able to lend. An chance that is non available under the public pension strategy, as subscribers contribute a fixed per centum of their wage throughout their on the job life. At any point in clip a subscriber can entree the province of their private fund and make up one’s mind for him or herself if they are having the best returns on their financess. This farther gives the subscriber or beneficiary the right and chance to travel their pension fund from one private pension fund to another should they believe that is in their best involvement and can have higher returns on their pension. This provides greater control and flexibleness in the finding of how one ‘s pension fund is managed.

Creation of occupations

One of the benefits of the proposed concern to the Ghanese economic


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