Income at Retirement and Consumption of Pensioners in Ghana: The Case of Ajumako-Enyanessiam District

ABSTRACT

The study investigated the extent to which SSNIT pensioners in Ajumako-Enyan-Essiam (AEE) district smooth and sustain consumption expenditure on nondurable goods and further analysed how the main determinants of consumption influence expenditure on nondurable goods at retirement. A total of 164 SSNIT pensioners who were household heads and aged 58 to 64 years were used for the study.  Data for the study which was collected in March 2019 was mainly primary data covering the period 2015 to 2019. The data set comprised total wealth from SSNIT, monthly consumption expenditures and extra income earned monthly. The difference in the means of consumption before and at retirement were used to compute change in consumption expenditure while the ratios of consumption to income were used for the expenditure sustainability analysis. Pension wealth, other source of income, age, number of dependents, sex, accommodation status and marital status were used as independent variables to predict consumption expenditure as the dependent variable using the White Robust Standard Errors of OLS. The results showed a 22.6% drop in consumption expenditure at retirement and 62.8% of pensioners being able to sustain consumption expenditure. Moreover, the regression results showed that with the exception of gender and accommodation status, pension wealth, other source of income, age, number of dependents and marital status emerged as determinants of consumption that significantly influence expenditure on nondurable goods. Conclusion drawn rendered the prediction of the life cycle hypothesis invalid in AEE district since consumption was found not to have been smoothed at retirement. The study recommends to the Government of Ghana to collaborate with SSNIT to concurrently adjust the minimum pension with minimum wage reviews in order to enable pensioners adjust themselves to current cost of living to be able to alleviate post-retirement poverty in the study district and Ghana in general. Employees are also advised to plan early and save enough resources in their working life before they retire.