Pension funds in Africa

Key issues

A sharp rise in life expectancy for Africa’s large youth population and adapting its pension systems to cater for the big number of informal savers are the two main challenges that African pension funds will need to address.

Africa’s growing pension needs

For many living in sub-Saharan Africa, retirement remains the preserve (and luxury) of the few employed by the formal sector. For the majority, working well passed the “traditional” retirement age of 65 is a norm. The United Nations Department of Economic and Social Affairs reports among those Africans above the age of 65, 52% of males and 33% of females were active in the labour force in 2015. The reality is that the majority of older persons in sub-Saharan Africa have no choice but to continue to work for as long as they are physically able, due to the absence of adequate savings. When compared to their contemporaries in Latin America and the Caribbean, 38% older men and 17% older women were working. In Europe, the measure is even more telling; 10% older men and 6% older women remained active in the labour force.

Investing in Africa is commonly associated with much coined themes – demographic dividend (youthful population) and emerging middle class. While much focus is on the compelling economic narrative supported by these themes, less coverage has been afforded to the African pension systems that must serve this youthful cohort when they inevitably grow old.


Africa’s youth will not only age, but will also live longer – introducing longevity risk. According to the UN World Population Prospects: The 2017 Report, globally, life expectancy at birth is projected to rise from 71 years in (2010 – 2015) to 77 years in 2045 – 2050 as illustrated by the graph below. Africa is projected to gain nearly 11 years of life expectancy by 2050, reaching 71 years in 2045 – 2050.

Africa’s pensioners will live longer

Pension systems serve as the conduit through which the current youthful African middle class will defer their income (save) for their retirement. Savings are the necessary ingredient for the development of institutional investment and investors in Africa. The symbiotic relationship between the pension systems (suppliers of savings) and the institutional investors (investors of savings) allows for the creation of assets that should safely and sustainably fund the retirement goals of African savers, both formal and informal.