Fulfilling the demand for ’savings’ vs. ‘pensions’
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In 2015, LeapFrog Labs and Petra ran a study to understand informal sector pension demand in Ghana, surveying 1,200 informal sector workers across Accra, Ashanti and the Western region of Ghana.
While pensions for formal sector workers are new in Ghana, 86% of all employment is found within the informal sector, presenting a significant additional opportunity. This study was conducted in collaboration with Creative Hub, Ghana.
A whistle-stop tour of findings
Majority never plan on retiring Of those interviewed, 59% of respondents never plan on retiring, believing they will always be capable of work. Of those that do plan on retiring, the majority believe they will do so between the ages of 60 and 70. Not surprisingly, the demand for a retirement “pension” was relatively low.
Different perspectives on the future from informally employed Informally employed respondents were more likely to plan on stopping than self-employed, but less likely to have financial plans for when they do stop work. This points to informal unmet demand.
Limited demand for “pensions,” but long-term savings are important While most respondents had no plans to retire, most reported a high level of interest in saving for the future. Further, 79% of informal sector workers already have access to a bank account, but cited limited options for long-term planning.
Starting to save early is important and is a sizeable market opportunity 55% of respondents were interested in a long-term savings product and were willing to contribute an average of US$171 annually. In addition, 53% of respondents said that pension planning needs to start in your 20s, highlighting a need for long term savings products.
Launch of Petra’s Savings Booster
These insights helped shape the design of Petra’s “Savings Booster”, an investment product that seeks to encourage long-term savings by allowing employed workers to save on top of their mandated pension scheme. Petra currently provides this product to formally employed workers, and seeks to expand to informal workers also. To-date, capped management fees have prohibited an agent-intensive distribution model for the informal sector, though digital strategies hold promise and are still being examined.