By:Ayuureyisiya Atafori Kapini
Ghana’s pensions sector is almost monotonous in product offer, majorly concentrating on the formal sector to the detriment of the informal sector. But recently, a revolutionary storm is sweeping through the insurance market almost with a vengeance.
Enter People’s Pension Trust Ghana Limited (PPT), walking straight to the informal operators with a big bear hug. The focus on the informal sector is calculatingly deliberate.
PPT has designed appropriate and innovative products for both formal and informal sector workers. But the new kid on the block has a soft spot for the informal sector. PPT has brought on a revolutionary way of collecting pensions, becoming a pace-setter. The success of PPT is set to become a model not only for the insurance industry in Ghana but also in the rest of Africa. Good omen portends as PPT has recently won an award, after obtaining a license in September 2016 from the National Pensions Regulatory Authority (NPRA).
PPT is licensed as a Corporate Trustee to implement the Tier 2 and Tier 3 Pension Schemes under the National Pensions Act, 2008 (Act 766). The Tier 2, sometimes referred to as ‘occupational or work-based pension,’ is mandatory for all employees like the Tier 1. The Tier 3 is a voluntary provident fund especially targeted at workers in the informal sector who are usually not covered by the two mandatory schemes (Tier 1 and Tier 2).
PPT operates under the regulations of the NPRA and works with a fund manager and a custodian bank in managing clients’ contributions. This ensures the safety of clients’ investments. There are about 27 corporate pension trustees which target the formal market in Ghana. Not PPT: it is the first to prioritise the informal sector.
One of the main brains behind PPT is Samuel Bediako Waterberg, the CEO of PPT. He has this to say: “Even though we have the license to operate both Tier 2 and Tier 3 like all other trustees, our priority is the Tier-3 with players in the informal sector as our prime target. We will roll out innovative Tier-3 products that allow informal workers save for their pension. People can contribute daily, weekly or monthly by paying cash, with a mobile device or through existing community organizations. We are also committed to ensuring that people are financially educated about saving for the long term.”
The uniqueness of PPT lies in its symbiotic relationship with its clients who spread words about its good products to the target persons. Flexibility does not just mean dexterity to PPT: it collects contributions via mobile money transfer so that customers living in places as distant as Walewale in the Northern Region can contribute. Customers have the opportunity to withdraw 50 per cent of their annual contributions.
PPT takes monthly, weekly and daily payments from taxi drivers, porters (‘kayayee’), gardeners, petty traders and many other informal sector operators in order to secure their future. These persons usually do not have many opportunities in life and, as such, are vulnerable when they retire after exerting their youthful and adult energies to work for a living. PPT gets group collections by organising community members into co-operative-like associations.
The many-fold benefits of PPT’s products and services include a reliable income after retirement; attractive inflation-factored payments; flexible income collection; opportunity for raising investments; and providing security and a peace of mind in old age. PPT is targeting to provide at least 500,000 Ghanaians in the informal sector with easy and secured channels of saving towards their retirement within five years.
“This is based on our feasibility studies and research over the past two years in the country which has brought us face to face with the alarming extent of poverty among informal sector workers of pension age referred to as ‘Pension Poverty.’ It is not a pretty sight, and we will not stand by and look on for more people to walk into pension poverty,” states PPT on its website.
At an evening cocktail to mark the formal commencement of the operations of PPT in Accra early December 2015, which was attended by officials of the NPRA, representatives of Peoples Pension Holding (PPH) BV of the Netherlands, shareholders, investors, the media, clients and other stakeholders, Bediako Waterberg noted that PPT has come out with the best products to attract clients who would never regret doing business with the company. He said some of the products were based on zero percent tax on pensions, and that flexible corporate fund management by PPT’s reliable and knowledgeable fund managers and trustees make the company bound to succeed.
Bediako said the NPRA, the market regulator, was helping PPT to achieve the success in its operations. The NPRA is ready, he revealed, to team up with PPT to mount an educational campaign for financial inclusion, stressing that PPT would blaze the trail in promoting financial literacy in the country. By conducting financial literacy programs, PPT helps its clients understand better how pension schemes work and how much they can afford to save. Waterberg applauded PPT’s partners, especially its shareholders in the Netherlands, for assisting it to foray into the market with a bang.
At the cocktail, Amartey Vondee, the Director of Planning and Research at NPRA, congratulated PPT for focusing on the informal sector. Vondee said research has indicated that the sector has not been well catered for in terms of pension’s coverage. 80 percent of the active working population is in the informal sector, he said and recounted that the whittling down of the support given by the extended family in the past has necessitated pensions.
“We expect in 2050, 25 percent of the population will be above 60. And if 80 percent of them do not have a pension, then it will become chaos,” Waterberg told How we made it in Africa, a South Africa-based news portal. The portal reported that PPT’s pilot projects in the market revealed that, on average, its clients contribute about US$125 per year, with about 10 percent making use of the option to withdraw some of their annual contributions. Ideally, Waterberg believed PPT’s clients should be contributing about US$150 per annum to their pensions, an amount he said was feasible for informal sector workers, the portal reported. If a client contributes that amount every year, from the age of 30, by the time he or she is 60, they can receive an annual pay-out of US$360 for the next 20 years.
Waterberg expected the fund to garner a total of US$25 million in assets from its 500,000 contributors in the next five years. To do this, the company must first win the trust of the Ghanaian market in which clients are typically nervous about parting with their hard-earned and limited money, the portal detailed. There have been micro-savings companies in the past which have made the informal sector promises similar to PPT’s, but failed to deliver for various reasons. This has heightened market distrust. To counter this, PPT is partnering with established companies – that are already working with the informal sector – to offer pensions as an added benefit. Also, Waterberg believed that PPT’s strength lies in the fact that it is a for-profit business.
“Often you see projects that are started by grants and NGOs that are not sustainable – because the moment that the cash flow stops, so does the project. So we looked at how we could start a business that is commercially viable, because if it is commercially viable it is sustainable,” he explained. “We have designed PPT so that, in the long run, it is definitely able to make a lot of profit… and also help people come out of poverty,” Waterberg was quoted as saying.
According to PPT’s website, PPT is part of People’s Pension Holding (PPH) BV in the Netherlands. PPH, the largest pension insurer and administrator in the Dutch pension sector, has supported the development of PPT’s new products and its processes extensively.PPH also supports PPT to grow professionally with the required operational expertise. PPH builds Information Technology and micro pension knowledge in order to be able to support more pension companies like PPT. The ambitions and professional teamwork of PPH are to be found at PPT. Another shareholder of PPT is Bediako Waterberg.