Ghana's new securities levies could reduce the long-term returns for pension funds and other institutional investors. Dr. Arko Akoto Ampaw, Director of the Ghana Medical Association Fund, stated that higher regulatory costs on fund managers will likely be passed to clients. This means pension beneficiaries will ultimately bear the economic burden.
The critical issue is not who legally pays the levy, but where the economic cost settles after asset managers adjust their fees. Dr. Ampaw emphasized that pension funds are concerned about the net return to beneficiaries. Any increase in levies on market players will be passed on to these funds. This directly impacts the final amount investors receive after all deductions.
This development fits into Ghana's broader economic narrative regarding regulatory impact on financial markets. The Securities and Exchange Commission (SEC) introduced a revised charging regime. This regime aims to strengthen market oversight but raises questions about its unintended consequences. Previous discussions have focused on balancing regulatory needs with market competitiveness and investor protection. The capital market plays a crucial role in mobilizing long-term savings for national development.
“We can see that it is us who are going to bear that cost because the players in the market are going to charge them on to us,” Dr. Ampaw stated. He made these remarks during a NorvanReports Economic Governance Platform discussion. The program examined the SEC's new levies and their future impact on Ghana's capital market. This highlights the direct financial implications for millions of Ghanaians saving for retirement.
The implications are significant for Ghana's pension industry and individual savers. Decision-makers will need to monitor how fund managers adjust their pricing structures. Investors should also scrutinize the net returns reported by their pension schemes. This situation could lead to calls for a review of the levy structure to protect long-term savings. The financial stability of pension funds is vital for national economic security.
Dr. Ampaw's argument focuses on the economic incidence of regulation. A levy formally charged to an investment company does not always remain on its balance sheet. Fund managers might absorb some increase through lower margins. However, sustained cost increases influence management fees and product pricing. This directly affects negotiations with institutional clients like pension funds. The distinction between gross and net returns is central to this debate. A fund manager may report an attractive headline performance. Yet, management fees, custody costs, transaction expenses, and regulatory charges must be deducted. Only then can the true return retained by the investor be determined.
“Our biggest concern is the net return to beneficiaries,” Dr. Ampaw reiterated. “And any time you increase such levies on the market players, they pass it on to us.” He explained that fund managers retain earnings and report gross returns. From these, they deduct management fees, regulatory charges, and transaction costs. This process reduces the actual amount beneficiaries receive. For example, a reported 10% gross return could be significantly lower after all deductions. This erosion of returns directly impacts the financial well-being of future retirees.
Large pension funds possess some bargaining power due to their mandate size. This allows them to negotiate lower management fees. However, Dr. Ampaw warned that sharply higher regulatory charges could weaken this leverage. If fund managers face a 400% increase in regulatory payments, they will be less willing to reduce their own fees. This creates a second-order cost not immediately visible in the SEC's levy schedule. Even if a fund manager makes the regulatory payment, the institutional client ultimately bears the cost. This happens when management fees remain elevated or increase during mandate renewals. The total cost of investing for pension funds therefore rises.
The concern becomes more serious in a low-return environment. Fixed or recurring charges consume a larger proportion of investment income when gross returns fall. “The danger actually comes when there are low returns,” Dr. Ampaw stated. He highlighted the asymmetry between charges that remain payable and portfolio returns that fluctuate. This problem is particularly relevant under an asset-under-management levy. Such a charge links to the value of assets held, not the income those assets generate. A portfolio can produce little or no return while still attracting regulatory costs. For instance, if a fund manager returns nothing, they still scoop 0.225% of the fund value. This directly reduces the capital available for future growth. This situation poses a significant threat to the long-term sustainability of pension savings in Ghana.