The majority of people in Africa do not benefit from any public or employer supported pension scheme, while at the same time are living with diminishing traditional support from children. The book Saving the Next Billion from Old-age Poverty, estimates that there are 1.2 billion at risk of old-age poverty in Africa, Asia and Latin America.
This week, FSD Africa finalised a £350k commitment to the People’s Pension Trust Ghana, a subsidiary of the pension fund administrator Peoples Pension Trust, to help design and scale innovative tailor-made pension products for underserved and low-income people across Ghana.
Today, only 10% of people in Ghana have access to a pension scheme – when over 80% of the workforce is employed in the informal sector with no access to this vital safety net for later life. This initial investment will serve 500,000 Ghanaians with affordable pension services; if successful the products will be scaled to Rwanda and other countries in the region.
As life expectancy is increasing speedily in a lot of African countries, the family size is decreasing, and urbanisation is taking place. This means that more workers in the informal economy are getting into old age poverty when they retire, because they are unable to work due either to sickness or ageing. We are therefore happy to have this support from FSD Africa to tackle head-on this issue of old-age poverty” class=”blockquote-source”>Bediako Waterberg, CEO, People’s Pension Trust Ghana
PPT aims to serve 500,000 micro-pension customers and serve 1 million customers within 10 years. For now, the Rwanda operation will be a three-year pilot targeting 6,000 participants and 3,000 active users to test and learn in preparation for an investor fundraise and subsequent scaling.
The FSD Africa Investments will enable PPH to scale up its operations and provide innovative, technology-driven and customer-focused pension solutions to informal workers in other countries.
Through this investment FSD Africa also seeks to catalyse market system change by:
- Stimulating market-responsive, long-term savings through a pension fund vehicle that has the potential to reduce age-old poverty and fund assets (e.g. homes) while allowing customers to respond to short-term emergencies
- Introducing an innovative business model with potential for replication that leverages digital technology and a partner ecosystem to lower nsactional costs, reach highly dispersed markets, and drive consumer adoption;
- Expanding pension fund participation in long-term finance for developmentally important investments.