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Title: Actuarial investigations into pension provision in Ghana
Author: Ofosu-Hene, Eric D.
Awarding Body: University of Kent
Current Institution: University of Kent
Date of Award: 2013
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Previous studies on pension provision in Ghana have ignored the impact of the 2008 Pension Reform on the governance and regulatory and solvency risk implications for pension provision in Ghana. The literatures on pension fund investment policy have also ignored the portfolio risk considerations of the absence of a risk-free asset in the domestic currency. However, in many countries, including Ghana, domestic government and corporate bonds carry significant credit risk. This thesis examines three major areas of pension provision in Ghana. Firstly, it examines the implications and challenges of the 2008 Pension Reform for pension provision in Ghana. Secondly, it examines the impact of the 2008 Pension Reform on the solvency and level of pensions of the State Pension Scheme (SPS) in Ghana. Thirdly, it examines the effects of the absence of a risk-free domestic government bond on the investment strategy of a defined benefit pension fund, taking Ghana as an example. The analysis is extended to examine the impact of restrictions placed on pension funds' overseas investments as prescribed by the 2008 Pension Act. It is shown that the inherent weaknesses in Ghana's pension system persist following the 2008 Pension Reforms, that pension provision in Ghana is challenged by several factors, that the governance structure remains broadly unchanged and that further reforms are needed to ensure adequate, equitable and sustainable pensions in Ghana. Several recommendations are made to enhance pension provision in Ghana. Model simulations show that the 2008 Pension Reform has enhanced the level of pensions; however, the reform has worsened the solvency of the SPS, largely as a result of structural and parametric changes affecting the level of contributions. Alternative reform policies are suggested to improve retirement income provision and the solvency of the SPS in Ghana. Analysis using a multi-period asset and liability model indicates that, in the absence of a risk-free domestic government bond and within an adjusted-CAPM framework, the optimal pension fund investment strategy may be a non-corner solution, which requires a higher initial minimum investment. It is found that ignoring the default probability of domestic government debt may lead to serious underestimation of pension fund risks, resulting in an underestimation of the minimum investment requirement. It is also found that the restrictions placed on pension funds' overseas investments, as prescribed by the 2008 Pension Act, impose additional costs on Ghanaian pension funds. JEL Classifications: Asset and Liability Modelling, Adjusted-CAPM, Asset Allocation, Credit Risk, Domestic Government Bonds, Defined Benefit Pension Funds, Default Probability, Economic Scenario Generator, Ghana, Governance, Minimum Investment Required, Overseas Investment Restrictions, Investment Strategy, Longevity Risk, Market Risk, Mortality, Pension Fund Risk, Pension Provision, Pension Policy Review, Pension Population Projection, Pension Reforms, Regulation, Solvency, Stochastic Modelling.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available
Keywords: Ghanian pension funds