What Ghana’s Informal Workers Really Want From a Pension Scheme

In the bustling markets and small shops of Accra, millions of Ghanaians earn their living far from the reach of formal payroll systems. They are traders, artisans, and small business owners who form the backbone of the country’s economy, yet most of them have no pension coverage at all. A new study published in Discover Global Society has taken a careful, quantitative look at what would actually persuade these workers to start saving for old age, and the answers challenge several assumptions that policymakers have long held about how to design pension products for the informal economy.

The research team, led by Charles Kwofie of the University of Energy and Natural Resources with colleagues from the University of Ghana and the University of Professional Studies, used a technique known as a discrete choice experiment to probe the preferences of 150 informal sector workers in the Accra Metropolis. Rather than simply asking people whether they would like a pension, the method presents respondents with pairs of hypothetical schemes that differ across several attributes and asks them to choose between each pair. Because every choice involves a trade-off, the researchers can recover the hidden weight that each worker places on individual scheme features, from the size of the contribution to the identity of the fund manager.

The intellectual foundations of the approach stretch back decades. Kevin Lancaster’s characteristics theory of value holds that consumers derive utility not from goods as whole bundles but from the attributes those goods possess, while Daniel McFadden’s random utility theory provides the statistical machinery for modelling choices made under uncertainty. In this framework, the utility a respondent assigns to any pension scheme is decomposed into an observable component driven by the attributes and an unobservable random component. The probability of choosing one scheme over another can then be estimated, in this case with a conditional logit model applied to an impressive 8,400 choice observations generated by 150 respondents each completing 28 binary choice sets.

The four attributes at the heart of the experiment were chosen through a rigorous three-stage process. A review of the informal pension and choice experiment literature identified candidate features known to drive demand, namely cost, benefit structure, payment flexibility and the identity of the scheme administrator. These were refined through consultation with two actuarial and pension specialists and a review of the design of the Social Security and National Insurance Trust’s third-tier Personal Pension Scheme, established under the National Pensions Act of 2008. Finally, a pilot with fifteen respondents from the target population confirmed that the wording was understood and the levels were realistic before the main survey began.

The headline findings are striking. Informal sector workers strongly prefer pension schemes managed by private trustees over those managed by government entities, with the aversion to government management amounting to roughly 53 percent of the utility swing associated with contribution affordability. They also want flexibility in how often they pay, reflecting the irregular and seasonal nature of informal incomes, and they favour affordable contributions over expensive ones. Perhaps most tellingly, the workers chose defined benefit plans over defined contribution plans, signalling that they value certainty about what they will eventually receive more than the prospect of higher but uncertain returns. The full preferred bundle corresponds to an estimated willingness to pay of about 31.43 Ghanaian cedis per member per month, or roughly 37.7 million cedis annually for every 100,000 enrolees.

The statistical evidence behind these conclusions is robust. The conditional logit model produced a chi-square statistic of 972.15 with a p-value at or below 0.001, and all four attributes were statistically significant. The sample size comfortably exceeded the minimum threshold of 55 respondents derived from standard stated-preference formulas, and the two-alternative design required at least 100 decision-makers in total, a bar the study cleared with room to spare. Ethical approval was obtained from the Committee for Human Research and Ethics of the University of Energy and Natural Resources, and all participants gave informed consent before data collection.

When the researchers disaggregated the results by gender, they found that men and women share the same ordering of preferences but differ in intensity. Female respondents, who made up 20 percent of the sample, were less sensitive to an expensive contribution amount than their male counterparts, with coefficients of negative 0.52 versus negative 1.02, suggesting that women are willing to commit a greater share of their income to a scheme they trust. Women also showed a stronger aversion to government fund managers and a stronger preference for defined benefits, indicating greater risk aversion and a higher value placed on benefit certainty. The authors caution, however, that the female estimates rest on only 30 respondents and should be read as indicative rather than conclusive, since women are widely reported to account for a large share of informal sector employment in Ghana.

Education told an equally revealing story. Respondents with no formal education, who constituted 51 percent of the sample, were the most sensitive to contribution costs, with a coefficient approaching negative 1.28, while sensitivity declined steadily among those with senior high school and tertiary education. A plausible explanation is that workers with lower educational attainment typically earn lower and less predictable incomes, so any given contribution represents a larger slice of their earnings. The least educated group also showed the strongest aversion to government-managed funds, at roughly negative 0.66 compared with about negative 0.29 among the tertiary educated, hinting that greater financial literacy softens distrust of public institutions. Even the most educated respondents, however, still preferred defined benefits, underscoring how central certainty is across the entire spectrum.

The practical implications for Ghana’s pension architecture are considerable. The third-tier scheme created under Act 766 already relies on licensed private trustees and pension fund managers, a structure that aligns closely with what informal workers say they want. The findings also support product designs built around mobile-money platforms that enable micro-contributions, several of which are being piloted across other African countries, since flexible payment schedules match the volatile cash flows of petty traders and artisans far better than rigid monthly instalments. A hybrid product combining affordable contributions with higher returns delivered with certainty emerges from the analysis as the ideal target, one that would also be financially sustainable for providers.

The study arrives at a politically charged moment. After the December 2024 general elections, Ghana’s governing party has intensively championed pension contributions among informal sector workers, and a proposed pension product for cocoa farmers, announced in the 2018 budget, has completed preparatory work but has yet to be implemented. By quantifying the specific attributes that drive willingness to contribute, the research offers SSNIT, the National Pensions Regulatory Authority, private trustees and fund managers actionable guidance on the scheme features most likely to attract enrolment. The authors also frame an agenda for future work, asking how preferences vary by income and location, whether specifying contributions directly in cedis would change the valuations, how funding and longevity risks can be reconciled with the demand for defined benefits, and whether behavioural factors such as trust, financial literacy and mobile-money convenience can be integrated into stated-preference models. For a sector where the majority of the workforce operates outside formal social protection, the answers could shape the retirement security of millions.

Subject of Research: Willingness to pay for pension contributions among informal sector workers in Ghana using a discrete choice experiment

Article Title: Using discrete choice experiment to investigate willingness to pay for pension contributions in the informal sector of Ghana

Article References: Kwofie, C., Nortey, E. N. N., Tetteh, B. N. A., & Kumi, W. (2026). Using discrete choice experiment to investigate willingness to pay for pension contributions in the informal sector of Ghana. Discover Global Society, 4(1), Article 229. https://doi.org/10.1007/s44282-026-00574-5

Image Credits: AI Generated

DOI: 10.1007/s44282-026-00574-5

Keywords: pension, informal sector, Ghana, discrete choice experiment, willingness to pay, conditional logit, SSNIT, defined benefit, fund managers, social protection, random utility theory, Accra