Old Age Insecurity & Retirement Poverty: A Call to Action for 600 million Africans

Africa is the second most populous continent, with an estimated 1.5 billion people. Its working-age population (20-64 years) is expected to reach 1.6 billion by 2050 [1]. However, over 600 million working-age Africans currently lack access to formal pension, retirement savings, and social protection systems. This poses a latent, but potent, unresolved risk to the continent's economic development over the next two decades and beyond. This blog underscores the importance of retirement planning and old-age pension schemes, and emphasizes the need for Africans to save and invest for their old age. It also explores factors contributing to the lack of retirement or old-age planning in Africa and suggests concerted efforts that can be taken to change the situation.

“600 million of the 778 million working-age population in Africa are excluded from formal pension and social protection arrangements and face the grim prospect of living in extreme poverty for over 20 years after they are too old to work,” African Pension Supervisors Association [2].

Pensions and retirement savings are vital for capital formation, accumulation, growth, and economic development worldwide. The lack of strong and viable retirement savings' institutions and culture pushes the elderly into old-age poverty and economic vulnerability. In addition, it increases economic dependence on Africa's younger population. This 'black tax' leads to the economic impoverishment of the sandwich generation (middle-aged adults who are simultaneously caring for aging parents and their children) and impacts their ability to overcome poverty in adulthood and in old age. In summary, the lack of retirement savings will, unfortunately, perpetuate the generational cycle of poverty in many nations where it exists.

The importance of retirement savings to economic development and growth explains why certain countries attract more migrants from the Global South [3]. The wealth of nations and the size of their pension savings are directly linked. Unsurprisingly, the wealthiest countries hold a significant portion of global pension assets, totaling over $60 trillion. Ninety-one percent of these assets are in just seven developed economies: the US, Japan, Canada, the UK, Australia, the Netherlands, and Switzerland. South Africa is the only African country among the top 22 pension markets, with pension assets of $347.2 billion, which accounts for less than 1% of the global pension market and makes up about 70% of Africa’s $400-500 billion in pension assets [4,5]. The key takeaway from this is that Africans are not saving enough for retirement, and women are particularly due to gender inequality and discrimination, adding more challenges to how they plan for their old age.

Factors Driving the Lack of Effective Retirement Planning in Africa

My extensive research on retirement planning in Africa identified seven key factors contributing to poor retirement preparedness. These factors threaten to plunge over 600 million Africans—both Baby Boomers and Generation X—into avoidable old age poverty.

1. Wrongful Diagnosis of the Problem of Retirement Planning as only A Pension Savings Challenge: The problem is often misdiagnosed and oversimplified, focusing solely on the lack of pension savings among African workers while ignoring associated challenges within the control of state actors, outside the control of the individual.

2. Lack of Gratuity and End-of-Employment Support: Most employment laws and contracts in Africa do not make provisions for end-of-employment or retirement gratuity support beyond individual retirement savings.

3. Low Patronage of Formal Pension Systems: Across Africa, 600 million working-age individuals are outside formal retirement schemes. Additionally, 76% of those in informal employment without pensions drive the continent toward a retirement poverty tsunami [6].

4. Unemployment and Unproductive Employment: The African Development Bank warns that about 100 million young Africans could be unemployed by 2030 [7]. High unemployment and underemployment hinder individuals’ ability to contribute adequately to pension schemes.

5. Economic Challenges Impacting Pension Assets Valuation: Factors such as low GDP growth, high inflation and interest rates, and currency fluctuations threaten the value of pension assets. For example, currency devaluation in Nigeria cost Nigerian pension contributors $18 billion in 2024, with pension assets losing 54.6% of their value over five years [8].

6. Lack of Institutionalized Old-Age Social Security Policies and Programs: In 2020, only 17.4% of Africans had access to at least one social protection benefit, compared to a global average of 46.9% [9]. The absence of social safety nets exacerbates the risk of old-age poverty.

7. Gender Disparity in Retirement Planning: Globally, women face unique challenges in planning for retirement and old age, more than men. Addressing these issues is crucial to improving living outcomes for African women.

Recommendations

There is an urgent need for coordinated institutional, policy, and multistakeholder actions at the continental, regional, and national levels. The AU, regional organizations, and individual countries must develop comprehensive policies and programs to address the factors driving the upcoming old-age poverty crisis, focusing on the issues outlined above. Three social security policy recommendations that can help improve retirees' overall economic outcomes and enhance their retirement experience include;

• A social security program that deploys conditional pension or old age cash transfers to people within a defined retirement age bracket. This can cater to basic needs and be adjustable to the prevailing minimum wage benchmark and inflation. This would be in addition to contributory pension savings.

• Free Health insurance for retirees and older citizens to ensure that the health needs of all retirees are well addressed ultimately reducing out-of-pocket expenses.

• Institutionalized pension savings programs to target the 76% of Africans working in the informal sector of the economy, who are not involved in or covered by any formal pension savings' arrangement.[10]

References

1. (Blog) As Africa’s Population Crosses 1.5 Billion, The Demographic Window Is Opening; Getting The Dividend Requires More Time And Stronger Effort https://www.uneca.org/stories/%28blog%29-as-africa%E2%80%99s-population-crosses-1.5-billion%2C-the-demographic-window-is-opening-getting

2. African Pension Supervisors Association: Sustainable Pension Inclusion in Africa. https://www.africapsa.org/wp-content/uploads/2024/02/13_02_2024-APSA-Conference-27-29-November-2023-Version-11th-December.pdf

3. Retirement Reinvented and Deconstructed: Game Changing Strategies for Blissful Retirement https://www.lulu.com/search?page=1&sortBy=RELEVANCE&q=Retirement+Reinvented&pageSize=10&adult_audience_rating=00

4. Thinking Ahead Institute: Global Pension Assets Study 2025 https://www.thinkingaheadinstitute.org/content/uploads/2025/02/GPAS-2025-1.pdf

5. Global Perspective Presentation: How Can Pension Funds Fuel Infrastructure Development Impact Economies Using International Best Practice? https://aercafrica.org/wp-content/uploads/2025/04/2025-Victor-Murinde-Pension-Funds.pdf

6. The Transition from the Informal to the Formal Economy in Africa https://www.google.com/url?sa=t&source=web&rct=j&opi=89978449&url=https://www.ilo.org/media/390136/download&ved=2ahUKEwjrgdbD7NiOAxUFWUEAHTc-Mh8QFnoECBYQAQ&usg=AOvVaw09oRBa1Tnd8IemFY3Uv69z

7. 100 million Africans could be unemployed in 2030, new report says https://www.weforum.org/stories/2019/09/as-africa-develops-should-they-look-towards-investing-in-renewable-energy/

8. Pension asset dollar value drops 55% on naira devaluation https://businessday.ng/news/article/pension-asset-dollar-value-drops-55-on-naira-devaluation/

9. Africa Regional Social Protection Strategy 2021-2025 https://www.ilo.org/sites/default/files/wcmsp5/groups/public/@africa/@ro-%20abidjan/documents/publication/wcms_828423.pdf

10. The Transition from the Informal to the Formal Economy in Africa https://www.ilo.org/publications/transition-informal-formal-economy-africa-0

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About The Author

Dr. Olayiwola Oladapo is an experienced futurist, international organizational development, and policy expert with deep knowledge of Africa’s private and public sectors. He founded the Africa Public Policy and Governance Network (APPGN) and is a prolific policy analyst focusing on African development issues. His books include "Retirement Reinvented, Deconstructed: Game-Changing Strategies for Blissful Retirement," "The Richest Man in Retireland," and "The Reinvented Billionaires' Mindset."