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

Pension scheme for the workforce in the informal sector of Ghana remains a vital welfare issue and, in this regard, under the National Pension Act, 2008 (Act 766), the Social Security and National Insurance Trust (SSNIT) through its Personal Pension scheme has made provision for the sector. In Ghana, majority of the workforce are in this sector and therefore, understanding preference for these workers remain a paramount issue of concern. This paper investigates preferences for pension scheme among workers in the informal sector of Ghana. A discrete choice experiment (DCE) approach was employed to investigate some important attributes that make pension attractive to the workers in the sector. The conditional probit of the discrete choice experiment was used to analyse the choice set responses. Key attributes considered are contribution amount, pension plan, frequency of contribution payment and fund managers. A total of 150 questionnaires from market women and small business owners in the Accra Metropolis was analyzed in this study. The results revealed that workers in the sector will prioritize pension scheme managed by private trustee coupled with flexibility with regards to frequency in contribution payment. Again, the results show that, pension scheme with an affordable payment and defined benefits was preferable by these workers. Analysis of gender disaggregation (male representing 80% and female 20% of the sample) reveals that both genders have the same preference of ordering, however, women are less sensitive to the amount contributed and show much preference for defined benefits for private fund managers. Subsequent analysis according to education level (uneducated 51%, up to senior high school 26%, up to tertiary 23%) shows extensive preference for the attributes, in particular, as the educational attainment rises, sensitivity to the amount contributed and demand for benefit certainty declines accordingly. Practically, the findings provide actionable guidance for SSNIT, policymakers and fund managers on the scheme features most likely to attract informal sector enrolment. Theoretically, the study extends the application of random utility theory and the discrete choice experiment to informal sector pension demand in a developing-country setting, demonstrating how stated-preference methods can reveal latent welfare trade-offs that revealed-preference data cannot capture.