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International Social Security Association

International Social Security Association. ISSA REGIONAL CONFERENCE FOR ASIA AND THE PACIFIC. New Delhi, India, 21-23 November 2006. Management and Performance Challenges Encountered in the Investment of Social Security Funds

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International Social Security Association

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  1. International Social Security Association ISSA REGIONAL CONFERENCE FOR ASIA AND THE PACIFIC New Delhi, India, 21-23 November 2006 Management and Performance Challenges Encountered in the Investment of Social Security Funds The Experience of the Social Security and National Insurance Trust of Ghana Kwasi Boatin / Ernest Nyarko Social Security and National Insurance Trust Ghana

  2. PENSION HOUSE – THE HEAD OFFICE OF THE SOCIAL SECURITY & NATIONAL INSURANCE TRUST Social Security and National Insurance Trust - Ghana

  3. BACKGROUND • Ghana’s statutory Pension Scheme was established in 1991 under PNDCL 247 with SSNIT as the Trustee • The Scheme covers • Old age • Invalidity • Death and survivors’ lump sum payments • Health Benefits • The pensionable age is 60 and the benefit levels under the Scheme include: • 50% of average of the best three years salary for a contribution period of 240 months • Pensions are capped at 80% of insured earnings, with current minimum monthly pension at ¢125,000 (approx. US$14) Social Security and National Insurance Trust - Ghana

  4. THE SCHEME’S INVESTMENT GUIDELINES • The current investment guidelines of the Scheme were developed and adopted in 2003. • The guidelines were developed in response to the conditions that prevailed when the current Board of Trustees assumed office in 2001 • The Scheme’s investments were skewed towards fixed income instruments, when market conditions suggested more profitable investments Social Security and National Insurance Trust - Ghana

  5. SSNIT – Asset Allocation Structure (1996 – 2005) Social Security and National Insurance Trust - Ghana

  6. Performance of SSNIT Portfolio vs. Selected Money and Capital Market Instruments Social Security and National Insurance Trust - Ghana

  7. INVESTMENT GUIDELINES AND ASSET ALLOCATION POLICY • Investment objectives • Investment programme and structure • Investment management • Role and duty of investment Subcommittee • Role of portfolio managers • Reporting • Proxy voting and trading policy • Performance measurement Social Security and National Insurance Trust - Ghana

  8. Asset Allocation and Performance Measurement Asset ClassAllocationPerformance Benchmark Equities • Active Public Equity 25% 150-200 bps over the GSE Index • Unlisted portfolio 4% 20-25% Return on Equity Fixed Income • GOG Bonds 1% 5% Real Return (Inflation linke • Third Party Lending 4% Bank of Ghana Prime+100 bps • Corporate Debt 2% Average Comm. Bank Base Rate - 150 bps • Students’ Loans 12% 1 year Treasury bill rate Money Market 32% 91-Day Treasury Bill rate Real Estate 15% 1 year T-Bill + 200 basis points SPI/ETIs 5% Cost Recovery (minimum) Social Security and National Insurance Trust - Ghana

  9. INVESTMENT MANAGEMENT CHALLENGES • Internal Challenges • Investment monitoring capacity • Asset allocation: target vs. actual • Industry and Regulatory Challenges • Small country markets • Corporate governance and trust building • Legal and regulatory environment • The pension law vs. foreign investments • Limited exit opportunities • Currency risks • Inadequate infrastructural base • Other Challenges • Public perception • Political factor Social Security and National Insurance Trust - Ghana

  10. PERFORMANCE REVIEWImproved Financial Health • Improved financial health Social Security and National Insurance Trust - Ghana

  11. PERFORMANCE REVIEWAsset allocation: Target vs. Actual Social Security and National Insurance Trust - Ghana

  12. PERFORMANCE REVIEWImproved returns Social Security and National Insurance Trust - Ghana

  13. PERFORMANCE REVIEWSSNIT’s Portfolio vs. the GSE Benchmark Social Security and National Insurance Trust - Ghana

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