Preparation for retirement is an important component of ensuring personal finance but is still in its infancy in many regions of Sub-Saharan Africa. Indeed, the region has the diversity of economic systems and cultural models, but despite this there are problems – one of these common issues is a low density of pension systems. Financial literacy has come out as a major lever in closing this gap and stimulating pensions’ uptake across the countries in the region.

The Current State of Pension Systems in Sub-Saharan Africa

In Sub-Saharan Africa, pension systems exist in the form of public and private schemes, informal saving associations, and employer-provided pension schemes. Nevertheless, coverage remains fundamentally low. In Sub-Saharan Africa, it is estimated that only 10-15% of the working population is affiliated with a pension plan in a workplace according to ILO. This low coverage is largely attributed to:

1. Large Informal Sector: For more than 80 percent of the workforce population, informal employment means that hardly anyone has access to pension plans provided and managed by employers.
2. Lack of Awareness: In general, few people have any knowledge of retirement planning or pension schemes in existence.
3. Mistrust and Distrust of Financial Institutions: A history of poor management and low accountability of some pension funds continues to fuel doubt.
4. Monetary Constraints: Low incomes in many Sub-Saharan African households puts several families in a tight corner, as they cannot afford to put a little something aside as retirement savings.

The Role of Financial Literacy

Financial literacy plays a pivotal role in addressing these challenges and promoting pension uptake. Here’s how:

1. Creating Awareness
   Financial literacy forums impart knowledge in the area of retirement saving and the value of the enrolment in pension schemes. For instance, in Zambia, the Pension and Insurance Authority (PIA) and other private players arrange workshops, media interactions, school visitations, and mall activations, among other activities, much more during the Pensions Awareness Week held in the month of November every year, in their attempt to explain the principles of pensions.
2. Building Trust
   Educating the public the way pension schemes work and the measures put in place to safeguard their benefits and thereby rebuild trust in financial institutions. Services fees and benefits, and more to do with fund management must be shared openly.
3. Empowering Informal Sector Workers
   Financial literacy enables informal sector workers to learn how to save, invest and grow funds required for a decent retirement by participating in voluntary pension schemes. In third world countries like Kenya and Ghana, through the use of mobile technologies, contributors are able to subscribe to micro pension solutions by saving a small portion of their income.
4. Improving Economic Participation
   Enhanced understanding in revenue management enables people to plan well for their retirement and save despite scarce capital.

Successful Models in the Region

A number of Sub-Saharan African countries have advanced remarkably from utilizing financial literacy to enhance the uptake of pension plans:

• Kenya: The National Social Security Fund has aligned itself with the mobile network providers to ensure the target group of the informal sector receive financial literacy alongside basic savings solutions.
• Ghana: Following the introduction of the informal sector pension schemes under the Social Security and National Insurance Trust (SSNIT), there have been widespread public awareness campaigns to boost uptake.
• South Africa: Provision of financial literacy by providers of retirement planning services is a vital and deliberate component of their service offering. This, in the mid to longrun, skews perceptions on retirement savings in the right direction.

The Way Forward

To drive further progress, stakeholders in Sub-Saharan Africa must adopt a multi-pronged approach:

• Integration of Financial Literacy in School Curricula: Teaching young people about finances and how to plan for their retirement provides a strong base in decision making. From a tender age, they would have developed the right attitude on financial management, and retirement planning in particular.
• Tech Utilization: Financial literacy is also easily shareable and cheap to deliver given the nature of mobile applications and digital platforms.
• Team up with Key Figures in Society: Involvement of prominent andreliable persons in communities can improve the reliability of the existing and the future financial literacy programs.
• Government Support: Government should encourage the private sector to embark on pension education and ensure that regulations that guide the engagement provide for checks and balances.

Financial literacy is a force to be reckoned with in driving up the uptake of pensions in Sub-Saharan Africa. By ensuring that individuals, especially in the informal sector, are knowledgeable about the importance of pensions and are further equipped with tools essential for arriving at informed retirement decisions, stakeholders will be able to root out systematic vices that continually impede sound financial planning. With increased awareness in financial literacy within the region, the desire and possibility of creating a financially secure future for millions in their old age becomes a reality.