The Domestic Debt Exchange Programme will blight the fortunes of pensioners and erode the gains in private pension funds, Dr. Kofi Anokye OWUSU-DARKO – a former Chief Executive Officer-National Pensions Regulatory Authority (NPRA) – has warned.
The value of private pension funds – 2nd-Tier and 3rd-Tier – stood at GH¢28billion, 71 percent of the industry’s GH¢39.6billion total assets under management (AUM) in 2021. He however said the DDEP, in its current state and form, will have a negative impact on retirement incomes and erode confidence in the three-tier pensions system, particularly private schemes, if allowed.
“Labor unions need to touch base with their members since – unlike public pensions (tier 1) which may be mandated to take decisions that will collectively bind their members – private pension funds, 2nd-Tier and 3rd-Tier, are vested in the individual names of their members and their express consent is needed,” Dr. Owusu-Darko said in an article to the B&FT.
He said the Programme is an avoidable risk that trustees holding assets in trust should desist from participating in.
Similarly, other industry watchers are concerned that the sustained growth in private pension schemes – since inception of the three-tier system in 2010 – could be jeopardized if private pension funds are roped into the Debt Exchange Programme.
Government through the DDEP is requesting holders of bonds to voluntarily swap around GH¢137billion of domestic notes and bonds for new ones with extended maturity dates. The Programme requires the participation of at least 80 percent of bondholders.
The Programme has however been met with resistance from various investor groups – including individual bondholders, pension bondholders and financial analysts.
For instance, after carefully examining the Programme, the Pensions Chamber concluded that it will be detrimental to the interests of contributors to pension schemes.
“The Pensions Chamber would like to assure contributors to pension schemes that the industry has not agreed to the Debt Exchange Programme proposed by the Ministry of Finance,” it said in a statement.