Modeling of Pension Fund Using Garch: Case Study of SSNIT

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October, 2016
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The introduction of the three-tier contribution scheme under the new pensions Act has brought great reforms in the pensions industry. Currently a total of 18.5% of the contributors basicsalary is deducted for pensions and only 11.0% goes to SSNIT , 2.5% goes to the management of the National Health Insurance Scheme and the remaining 5.0% goes to the second-tier The challenging aspect of the new Pension Act is that , although the contribution level of SSNIT is reduced ,SSNIT is asked to provide monthly pensions for at least fifteen years (additional three years) so far as a contributor lives and also provide forms of invalidity. In view of this, the researcher used the GARCH model in fitting a model for the fund size and predicted the funding level of the Trust, The sustainability ratio of the fund which determines how much sustainable the fund was within this period was also examined The predicted values showed an upwards trend in the fund size and an increase in the sustainability ratio. It was also observed that one major factor that affected the funding level of the trust was indebtedness to the Controller and Accountant Generals Department. It was the institution with the highest indebtedness percentage. The study recommended much lucrative investment opportunities for the Trust to look at, to increase its sustainability level and also measures to put in place to increase its outflow especially its expenses on operations and administration
A thesis submitted to the Department of Mathematics, Kwame Nkrumah University of Science and Technology in partial fufillment of the requirement for the degree of Master of Science in Actuarial Science,