Rising life expectancy in Africa triggers urgent need for pension penetration

Rising life expectancy in Africa triggers urgent need for pension penetration

Governor John Rwangombwa of the Central Bank has said that the improved life expectancy in Africa is a positive factor on its own but it rings an urgent call to increase pension penetration on the continent.

He was speaking during the 3rd Africa Pension Supervisor Forum that started on Thursday July 14.

Started in 2019, the forum offers a platform where pension regulators share ideas, information, and reform issues that are challenging the sector across Africa.

Discussions include performance of the pension sector –globally and on the continent, digitization in the pension sector, enhance cyber resilience and pension sector sustainability.

Life expectancy at birth in Africa gradually increased to 64 years in 2020 from 48 years in 1980. This means the retired population ratio will continue to increase which is an expected demographic transition as economies and health systems become more developed, Rwangombwa said.

“We are, therefore, called upon to do better as a continent and it is paramount that most, if not all, of the labour force is covered by formal pension schemes.”

While the benefits of a developed and inclusive pension industry are undeniably enormous, he said, it is unfortunate to note that the level of pension penetration on the continent is very low when compared to other parts of the world.

“For instance, only 6.3 per cent of Sub-Saharan Africa’s labour force is covered by contributory pension schemes, a trivial level when compared to high-income countries whose coverage is close to 100 per cent.”

Rwangombwa cited the need to open up private pension schemes that would come up with better customization of products and services especially targeting the informal sector which makes up about 80 per cent of African labour force.

Alfred Ouma Shem, Chief Manager of Research and Strategy Department, Retirement Benefits Authority of Kenya, said that currently Africa has a youthful population but it will not remain so for very long.

“We are going to have a bulge at retirement and probably we will not have accumulated enough savings to fund their lives. It is a challenge we need to deal with while they are still working,” he said.

Source: New Times