Diversification without Diversification: Can the Multi-Pillar Pension Structure in Ghana Engender Diversification Risk in Pension Fund Management ? (Part I)

The road to pension liberalization was largely necessitated by unsustainable pension systems in Ghana. While the social insurance of family ties is weakening in recent times, the formal pension system prior to 2008 was like HIV/AIDS as described in some academic publications; meaning it was a slow-but-sure killer. The history of pensions in Ghana is marked by inadequate pension income, corruption and mismanagement. During this period, the pension system had just one pillar, which was a define benefit (DB) scheme. A DB scheme is a promise by a sponsor (in this case government) bearing responsibility to pay a fixed life annuity; sometimes inflation-adjusted and benefits are a function of both years of service and wage history.  Since DB schemes enables the pooling and group management of funds, it provides risk-sharing properties that are not captured by Defined Contribution (individual pension accounts) models. However, they were unfunded, in that funds were not set aside for the payment of pensions; rather, pensions were paid from tax revenue whenever due; thus, earning the name pay-as-you-go pension.

The growing number of pensioners and slow economic growth increased the cost of pensions to the government and practically made it unsustainable to maintain an unfunded one pillar DB pension system. It is within this pension sustainability debate that the almighty concept of liberalism, which has gain grounds since the 1980s due to what was referred to as the “the crisis of the welfare state” in the west and the “weakness of post-colonialist bureaucracies” infected global pension schemes. In simple terms, pension liberalism implies the privatization of pensions and retirement planning mainly through Defined contribution (DC) schemes. In this wake and championed by the World Bank in a report entitled “Averting the old Age Crisis”, a three-pillar pension scheme including a mixture of DB and DC schemes were proposed to salvage the looming global pension crisis.  Although the World Bank didn’t make a direct contribution as argued by Kpessa (2011), its ideology was lingering in the mind of the Bediako Committee that undertook the pension reform in Ghana. Hence, the reason for the current three-pillar pension system in Ghana.

In this article, which is Part I of these series, I wish to share with readers some insights into the inherent risk of the neoliberal new three-pillar pension system in Ghana, which we shall refer to as “diversification risk”. This risk potentially exist as a result of the separation of the management of first and second mandatory pension contributions. While the separation of the management function provides diversification benefits, it also engenders risk given the high level of financial illiteracy in Ghana. Therefore, to borrow the words of the English Poet John Keat (1819), the separation process embodies the “Contrarieties of Life: the Irreconcilable but Inseparable Opposites of Life” – where there is life, there is death. In this case, its advantages could be in itself a disadvantage from a portfolio management perspective. This implies that merely dividing the pension system into three tiers does not necessarily mean diversification although one of the goals of the new multi-pillar pension system in Ghana (Kpessa, 2013; 2011; World Bank, 1994). I will work through some simple estimations to demonstrate the phenomenon of diversification risk. The rest of the article will focus on describing the latent diversification risk in our new pension system and how it could manifest and be magnified by financial illiteracy and information asymmetry – unequal information among economic agents; i.e. pension fund managers and pension contributors who make investment decisions.

The Bediako Commission set up in 2004 led to the enactment of the current National Pension Act, 2004 (Act 766) to introduce a contributory three-tier pension scheme to provide improved retirement benefits for all workers. The ACT requires employers to contribute 13% and workers 5.5% of gross income, making a total contribution of 18.5%. This distribution is presented below:

a.     First tier basic national social security (defined benefit –DB) (13% out of total contributions); which is managed by the Social Security and National Investment Trust (SSNIT) is mandatory for all employees in both the private and public sectors. 2.5% out of 13% is a levy for the National Health Insurance scheme;

b.     Second tier mandatory occupational (or work-based) “defined contribution (DC)” pension scheme (5% out of total contribution) is “fully funded” by employees and privately-managed by approved Trustees assisted by Pension Fund Managers and Custodians. It is designed primarily to give contributors lump sum benefits.

c.     Third tier voluntary provident fund and personal pension schemes, supported by tax benefit incentives for workers in the informal (blue collar) and formal sectors (white collar).

The three tiers (pillars) of the new pension system constitute a portfolio of pension investments, which has investment diversification as one of its goals. Under section 176 – Permitted Investments, pension fund managers have nine classes of investments to choose from, which broadly cover a host of capital market and money market investments. These include shares (ordinary and preferential), bonds (government and corporate), Treasury bills, investment funds like mutual funds and unit trusts, debt securities and real estate, etc. Each of these investments have unique risk and return profiles (behaviours) and are likely to provide diversification benefits as investment portfolio management requires. The principle of diversification implies putting your eggs in different baskets, so that in the event of loss, some baskets of eggs (investments) may be saved. In other words, as one basket of investments is doing well, another may be doing badly, so that the performance of the latter is compensated for by the former. Therefore the average (mean) return is the expectation of the investor. Where all investments are put in one basket, the mean is the same as the total return on the one basket of investment, which may increase the risk of the investment portfolio  without commensurate return.

Diversification Risk and the Separation of the Pension Management Function

Diversification is thus effective when selected investments behave differently. In the one basket investment scenario above, all the investments behave the same and likely to provide little or no diversification potential. However, in the different investment basket scenario, diversification is likely to be maximized; i.e. returned maximized and risk reduced. Diversification is most effective when the pension fund manager has perfect information about the investment types he/she is investing in. In that case, he/she may not put all his eggs in one basket. A statistical measure of diversification is the correlation of returns, which measures the relationship between investment assets returns. The lower the correlation, the better the diversification potential; so zero and negative correlations may provide better diversification than positive correlations between assets. A zero correlation means that there is no relationship between the return behaviour of the portfolio of investments. A negative correlation means a negative relationship, so that when the returns on one asset (A) is moving up, the return  on asset (B) is falling and vice versa, which is preferred.  A position correlation indicates that returns are moving in the same direction, which is mostly not preferred. diversification therefore minimizes the volatility (risk) of asset returns whiles maximizing returns.

Although the new pension system is restructured and obviously divided (diversified) into three different baskets of investments, the benefits of diversification may be elusive as the separation of the management function comes with “information asymmetry” among pension fund managers. In this vein, the first tier DB social security scheme is managed by the SSNIT; the second tier DC will be managed by pension fund managers appointed by pension trustees on behalf of pension contributors; and the third tier by the NTHC as proposed. Since, the latter is voluntary, we will focus on the first and second mandatory schemes from here.

Private pension fund managers are experts in investing in particular financial instruments, say bonds or shares or real estate. Despite their expertise, the likelihood that they may lack information about SSNIT’s investments of the first tier DB funds cannot be compromise. Hence, the separation of the management function as a result of neoliberalism (privatization) potentially could create unequal information (asymmetry) between SSNIT and private pension fund managers of the second tier, which could have the effect of compromising the benefit of diversification as required by having different baskets of investments. In other words, although the structure of new pension system is diversified in theory, diversification in practice may be unachievable because the managers of the two different baskets of investments, SSNIT (first tier) and private pension fund managers (second tier) may invest in the same investments, say bonds or shares or real estate at the same time. In effect, they may end up putting all of contributors’ contributions in one investment basket. The failure of this one investment basket means that everything fails unlike a situation where investing in different assets may save some. For the purpose of understanding the concept of diversification risk, I will discuss two scenarios; (1) an undiversified portfolio and (2) a diversified portfolio.

For instance, if SSNIT and the private pension fund managers invested in the same real estate investment vehicle, which produced a return of zero (0%), then the SSNIT will receive zero (0%) and the private pension funds also zero (0%). The total and average returns are both zero (0%); [i.e. 0% + 0% = 0% and (0% + 0%/2) = 0/2 undefined]. This is the worst case scenario of an undiversified portfolio. However, if SSNIT invested in real estate and the private pension fund managers invested in bonds which yields zero (0%) and 5% respectively, then the average of the investments’ returns [i.e. (0% + 5%)/2 = 2.5%], which is 2.5% is what a contributor will earn. A contributor’s total return will be 5%, i.e. 0% + 5% in the diversification scenario. Thus, the low performance of real estate is offset by a positive high performance in bonds.  

Besides, the effect described above is not exactly as it will be, given that SSNIT’s investments are guaranteed by government; so irrespective of returns on their investment, government must provide a positive above zero return to contributors. Thus, government’s guarantee mitigates investment risk – the risk that the investment will fail. This is because pension pay-outs from the first tier DB scheme is not market determined but by a formula which incorporates the length of service and contribution rate (how much a contributor saved with the government). Hence, using the same undiversified scenario above, if real estate yields zero (0%), the private pension funds and for that matter contributors will receive 0% but the contributor will not receive 0% from government guaranteed SSNIT managed pension funds. This is because governments as mentioned above usually commit (guaranteed) to pay a minimum return to contributors on its borrowings from the SSNIT; say 2% above inflation.  In this case, the total return becomes 2%; [i.e. 0% + 2%] and the average return [i.e. (0% + 2%)/2] will be 1%, which is better than the first undiversified scenario without government guarantee above.

The picture is even better with diversified portfolios with government guarantee of 2% minimum return above inflation. To illustrate this with the first diversified scenario, if market returns of SSNITs investment in real estate is zero (0%) but the private pension fund managers earn 5% from investing in bonds, then the total return and average return will be 7% and 3.5% [ i.e. 2% + 5% = 7% and (2% + 5%/2%) = 3.5%] respectively. This example is particularly important because it demonstrates that the “unguaranteed” privately managed second tier pension scheme should be watched closely with both eyes since returns (real) could be practically zero and even negative because returns are determined by market forces, which are volatile and uncertain. The phenomenon of diversification without diversification (“diversification risk” trap) fuelled by information asymmetry may exist in all multi-pillar pension systems, even in the advanced economies.

In Part II of these series, I will look at how “financial illiteracy” among pension contributors and “their right to make investment choices in the second tier defined contribution scheme” could manifest and magnify the diversification risk potentially inherent in the new multi-pillar pension system in Ghana.  

Kenneth A. Donkor-Hyiaman

kwakuhyiaman@gmail.com

Yes, Employees are entitled to make Pension Investment Decisions in DC Schemes

Pension fund management in Ghana has undergone numerous reforms, yet the basic lessons are neglected to the detriment of pensioners. Given the long history of meagre pension pay-outs, the new National Pension Act, 2008 (Act 766) was enacted to provide the impetus for another reform intended to maximize the pensions of contributors. Whiles this is laudable, a number of ambiguities and uncertainties in the Act could perhaps be the reason for the impending public sector strike action. My PhD research work borders largely on the 2^nd tier mandatory occupational pension scheme, but concentrates on Section 103 (2) of the new Pension Act, which enables contributors to borrow to acquire a primary mortgage against their 2^nd tier benefits as security. In this regard, I am motivated to make another contribution to the ongoing debate on pension fund management in Ghana.

In this brief article, I seek to discuss one of the uncertainties in the new Act in an attempt to provide a lead on whether the government is justified in appointing a pension trustee to manage the 2^nd tier pension contributions. My opinion is largely underscored by the theoretical and international empirical evidence about the operation of Defined Contribution Schemes, which the 2^nd tier is a typical example. The conclusion reached after a critical examination of the theoretical and empirical evidence is that, employees are entitled to make the decision as to which trustee manages its contributions. Government as an employers has no right in this regard to appoint the so-called Pension-Alliance Trust Limited to manage employees’ contributions.

Pension Schemes, Contributors’ Rights and Risks

A fair understanding of pension plans is perfect for understanding the arguments raised in this article. In spite of the varying terms, three basic designs (types) of pension schemes are common globally including defined benefit (DB) plans, defined contribution (DC) plans or both. DC plans by nature specifies contributions as a predetermined fraction of salary without certainty of benefits upon retirement unlike DB plans. DC by nature specifies contributions as a predetermined fraction of salary without certainty of benefits upon retirement unlike DB plans. The latter is a promise by a sponsor bearing responsibility to pay a fixed life annuity; sometimes inflation-adjusted and benefits are a function of both years of service and wage history. With DC schemes, benefit levels depend entirely on the total contributions and investment earnings of the accumulated contributions (primarily market-based and independent of retirement-period).

Whereas member contributions are ring-fenced and individually invested in a DC model, DB enables the pooling and group management of funds. Individual loans to members reduce the investment pool and can compromise the funds DB commitment upon borrower defaults; defeating its traditional guarantee of pensions. Trading off flexibility and a right to determine investment preferences with performance tracking possibility, contributors in a DC plan bears all the investment risk mainly including interest rate risk in unpredictable inflationary economies like Ghana; unlike a DB plan (Bodie, et al., 1988).

Investment risk is emergent at two levels; investment performance uncertainty and the real value of income streams or lump sum generated at retirement. Therefore, DB plans offer superior risk-sharing properties that are not captured by DC models. Hence, whereas the DC framework focuses on the value of the assets currently endowing a retirement account, the DB plan focuses on the flow of benefits which the individual will receive upon retirement. In Ghana, the 1st and 2nd tiers pensions are DB and DC schemes respectively.

The new National Pensions Act, 2008 (Act 766) establishes a contributory three-tier pension system which requires employers to contribute 13% and workers 5.5% of gross income, making a total contribution of 18.5%. This is as distributed below as:

a.       First tier basic national defined benefit (DB) social security scheme (13% out of total contributions); which is managed by the SSNIT is mandatory for all employees in both the private and public sectors. 2.5% out of 13% is a levy for the National Health Insurance scheme;

b.      Second tier mandatory occupational (or work-based) “defined contribution” (DC) pension scheme (5% out of total contribution) is “fully funded” by employees and privately-managed by approved Trustees assisted by Pension Fund Managers and Custodians. It is designed primarily to give contributors lump sum benefits. This tier is the bone of contention between government and public sector workers.

c.     Third tier voluntary provident fund and personal pension schemes, supported by tax benefit incentives for workers in the informal (blue collar) and formal sectors (white collar).

 Implications of Government (Employee) Appointing Trustee

After a long history of pension system failure, mainly administered previously by the SSNIT to provide adequate incomes for pensioners, the new system was designed to give contributors more room to determine how their contributions are invested. Thus, the 2^nd tier DC scheme was included in this regard to facilitate this intention. Aptly, the part of the 18.5% that is remitted to the 2^nd tier is the 5.5% of employees’ monthly income. This is just in line with the principle underlying the DC scheme. In other words, contributions remitted to the 2^nd tier are employees’ own money unlike the 1^st tier DB social security scheme paid by employers (government) for these public sector workers.  The 2^nd tier is therefore a sort of compulsory contractual savings scheme to help employees raise enough capital for their future. However, the new Pension Act has a “lacuna” which in my opinion is the cause of the current tensions regarding the management of the 2^nd tier. The Act fails to explicitly confirm the right of investment choice decision making on employees as is principle and international evidence of DC schemes. This gap is what government is exploiting by arrogating to itself the right to appoint a trustee. This is a matter of law and in the event that no “consensus ad idem” is reach, the law courts remain the last hope for employees.

The implication of government (employer) making the decision of a choice of trustee is a breach of the principle of DC schemes, which could create adverse selection and moral hazards for contributors. This is already the case with SSNIT’s management of the 1^st tier scheme. Hence, employees would be bearing unjustifiable risks for which they have not contracted. In that case, the 2^nd tier becomes just the DB 1^st scheme which is solely managed by SSNIT without employees input. Employees make no input in the investment of the 1^st tier social security because government “guarantees” the social security benefits of public sector workers. This means that irrespective of the investments’ performance, certain minimum pension pay-outs would be made to pensioners. Thus, government accounts for any shortfall in returns on investments.  In a way, this is the reason for the government’s excessive borrowing of pension funds from SSNIT for its activities. The 2^nd tier however has “no government guarantee”, potential lump sum benefits are determined by the market. The history of government’s pension guarantees in Ghana has however not improved pensioners’ standard of living. Therefore, government’s decision to appoint a trustee with the intention of guaranteeing the 2^nd tier in my opinion cannot be trusted. In other words, it reveals that without the so-called intended guarantee by government, employees are entitled currently to make their pension investment decisions.

Secondly, the government’s action represents bad leadership, in that, it could empower and signal private sector employers to act in a similar manner, which is likely to jeopardize the original intent of the 2^nd tier scheme. Reports already points to the fact that some private sectors employers are not paying the basic social security of their workers. For which reason, George Agudey, the erstwhile CPP Presidential candidate was sentenced to imprisonment. On the international front, employees in DC schemes determine which trustees manage their contributions, not government or any employer.

As rightly opined by Charles Osei Akoto, CEO of Stallion Trust stated “When you think about the fact that 45 percent of the formal sector workers are from the public sector and government lumps all these people and give them to one corporate trustee -  obviously that corporate trustee has a competitive advantage and that is what we are talking about”. Lets bear in mind that, the Pension Alliance Trust Limited is newly formed and may not have any track record, no evidence-based to support the reason for this favour, unless it for political expediency. So, the questions lingering on borders on how and why this trustee was selected. Stakeholders need to be informed.

Conclusion

The theoretical and empirical construct of the DC 2^nd tier mandatory occupational pension scheme bequeaths employees rather than employers (i.e. government in the case of the public sector) the right to determine which pension trustee manages their 5.5% pension contributions. The governments persistence in claiming to having the right to appoint a trustee to manage the 2^nd tier contributions of public sector workers is completely wrong and cannot even be cured by its intention to provide guarantee for the 2^nd tier scheme like the 1^st tier scheme, because of the distasteful performance of previous guaranteed schemes, such as the latter (1^st tier DB social security scheme). Since the 2^nd tier is not government’s money, the government should rather be much more concerned about the 1^st tier which is managed by its quasi institution, the SSNIT.

Going forward, the current agitation is good for aligning the risks and rights of employers and employees regarding issues of pension fund management in Ghana. Stakeholders should seize the opportunity to inform and educate the general populace especially contributors about the structure and nature of pension fund management in Ghana as provided by the new Pension Act, 2008 (Act 766). Enlightened people are better equipped to determine their future.

Kenneth A. Donkor-Hyiaman,

kwakuhyiaman@gmail.com

Pension Reforms in Ghana: Only a New Act, No Lessons Learnt?

I recently wrote about what I call the “Pension Irrelevance Theorem” (PIT) which literally suggests that pension schemes in developing economies are ineffective and for that matter of no need for the low and middle-income work force, who constitute the majority of pension scheme membership. The fact that pensions are mostly annuity payments unlike lump sums to be received commencing upon retirement expands the risk that many low and middle-income people in developing economies would not receive pensions  due to low life expectancy,  averaging 54.9 in Sub-Saharan Africa whiles compulsory retirement age is about 60 years – I refer to this as the “Retirement Planning Puzzle”. The Retirement Planning Puzzle was defined in the previous article as the difficulty in realizing and actualizing pensions. The phenomenon therefore pushes the receipt of pensions further into the uncertain future beyond the reach of the contributor who is likely to demise before pension benefits accrue. Unlike developed economies with high life expectancies making pensions important, low life expectancy in developing economies render a contributor’s personal need for pensions unjustified.

In this article, I argue that Ghana can use the many lessons from the past if they are well identified and understand. However, the primary and most critical lessons in my opinion have not been learnt from pension reforms in Ghana. This view is arrived at by analyzing the applicability of the “Pensions Irrelevance Theorem” through a review of the history of the pension industry in Ghana. The New National Pension Act of Ghana, 2008 (ACT 766) requires retrofitting or its effectiveness cannot be traced in the sands of time to come.

Defined Benefit and Defined Contributions Plans: Why it Matters

A fair understanding of pension plans is perfect for understanding the arguments raised in this article. In spite of the varying terms, three basic designs (types) of pension schemes are common globally including defined benefit (DB) plans, defined contribution (DC) plans or both. DC plans by nature specifies contributions as a predetermined fraction of salary without certainty of benefits upon retirement unlike DB plans. The latter is a promise by a sponsor bearing responsibility to pay a fixed life annuity; sometimes inflation-adjusted and benefits are a function of both years of service and wage history. Whereas member contributions are ring-fenced and individually invested in a DC model, DB enables the pooling and group management of funds. Hence, the investment risk of DC plans is emergent at two levels; investment performance uncertainty and the real value of income streams or lump sum generated at retirement. Therefore, DB plans could offer superior risk-sharing properties that are not captured by DC models.

Pension Reforms in Retrospect [1946 – 2014]

The Pension terrain in Ghana has undergone several developments from pre-independence to post-independence. The first pension program - a non-contributory pension scheme - was introduced by the Government in 1946 to cater for the retirement benefits of workers of the Colonial Administration offices. In 1950 and early 1960s, the CAP 30 Pension Scheme - created by the Pensions Ordinance Number 42 (CAP 30) - and Superannuation Schemes for public servants including certified teachers, university lecturers, and all government workers in the Gold Coast were established. Given the narrowness of coverage, the vast majority of ordinary Ghanaian workers could not benefit from these schemes. To cover all private and public sector workers who were not covered by the CAP 30 schemes, the Social Security Act (No. 279) was passed in 1965 originally as a Provident Fund to provide lump sum benefits for old age, invalidity and survivor’s benefits.

The establishment of the Social Security and National Insurance Trust (SSNIT) in 1972 under the NRCD 127 to administer the National Social Security Scheme replaced the repealed Social Security Act, 1965 (Act 279). After twenty-five years of administration, it was converted to a Social Security Pension Scheme which invested contributions in long maturity low interest rate special government bonds. Coupled with high inflation, lump sum benefits due to retiring beneficiaries were insignificant. To bring some adequacy into workers’ pension packages, the Social Security Act, 1991 (PNDC Law 2427) was enacted to transform the 1972 Scheme from Provident Fund to a DB Scheme. This came with a shift from investments in special government bonds to investments in a broad portfolio.

According to the NBD Ghana Limited, “ [t]he transition to a very broad investment portfolio required considerations that satisfied the needs of government on the one hand, the need to satisfy some social needs of the contributors and the need to generate commercial rates of return to balance the lower rates from the other portfolios”. Notwithstanding, the SSNIT schemes were less favourable compared with the CAP 30 pensions, particularly in terms of the lump sum benefit, which resulted in agitations and protests by some public sector workers on the SSNIT Scheme. The Bediako Commission set up in 2004 led to the enactment of the current National Pension Act, 2004 (Act 766) to introduce a contributory three-tier pension scheme to provide improved retirement benefits for all workers. The ACT requires employers to contribute 13% and workers 5.5% of gross income, making a total contribution of 18.5%. This distribution is presented below:

a.       First tier basic national social security scheme (13% out of total contributions); which is managed by the SSNIT is mandatory for all employees in both the private and public sectors. 2.5% out of 13% is a levy for the National Health Insurance scheme;

b.      Second tier mandatory occupational (or work-based) “defined contribution” pension scheme (5% out of total contribution) is “fully funded” by employees and privately-managed by approved Trustees assisted by Pension Fund Managers and Custodians. It is designed primarily to give contributors lump sum benefits.

c. Third tier voluntary provident fund and personal pension schemes, supported by tax benefit incentivesfor workers in the informal (blue collar) and formal sectors (white collar).

Lessons Learnt from Pension Reforms [1946 – 2014]

The first obvious lesson is the issue of “increasing coverage of pension schemes” that replaced old schemes. For instance, prior to the coming into existence of the SSNIT in 1972, which extended its pension scheme to private sector workers, only public sector employees were covered by some form of retirement scheme. This has arisen because of concerns particularly about old age income security for all in Ghana. The second lesson is the issue of “pension inadequacy”, and a clear example was the disparity between pensions of previous CAP 30 members and the SSNIT pension schemes. One of the approaches used to achieve this ideal was to convert provident funds (usually for lump sums benefits) into DB plans as was the case in 1972 with the coming into effect of the Social Security Act, 1991 (PNDC Law 2427). The two major issues here is the investment problem: the limited availability of investment conduits and mandatory investment of contributions in low-yielding government bonds in the face of high inflation. Thus, creating diversification, risk reduction and return maximization problems for the schemes. The fact that pension contributions constitute a source of cheap funds to governments contributes to the pension inadequacy problem. The third lesson is a corporate governance issue. Prior to the enactment of the National Pension ACT, 2008 (Act 766), the DB nature of pensions in principle gave the “right to invest pension funds to a sponsor (SSNIT)”, who promised some predetermined benefits on a non-negotiable basis. Individual contributors had no business in determining their preferred investments. Their concerns were to be addressed by a Board, which ideally was believed to have comprised some sophisticated and experienced financial and investment experts. Moral hazards resulting from principal-agent problems largely because of information asymmetry are consistently persistent in all the schemes. To deal with this canker, a more diversified pension portfolio combining DB and DC plans has been introduced by ACT 766. DC plans as described earlier give the right of investment to the contributor; hence, contributors are as of right mandated to choose the pension trustees that manage their second-tier contributions as well as engage in investment asset selection. In effect, there is a sharing between contributors and trustees in the right to invest and the management of the pension scheme.

No Lessons Learnt

Despite these reforms, pensions in Ghana are still inadequate and largely unrealizable – that is the pension reality effect. In my candid opinion, these reforms are good but materially insignificant in maximizing the welfare of contributors, especially when the scheme is compulsory – the counterfactual could have been better. There appears to be a holding back in the choice to make the right decisions about the designs of pension schemes in Ghana; perhaps, deliberately from the government end or designers and managers have either lost touch with the pension reality or are not skilful enough. The very problem of pension inadequacy which has necessitated these reforms is still persistent and unlikely to be resolved by the new three-tier pension scheme. More seriously, is the existence of the Retirement Planning Puzzle and the Pension Irrelevance Theorem. Pension scheme coverage is increasing but many either do not live to enjoy their pensions or demise very shortly upon reaching retirement age because of low life expectancies and the drastic fall in their standards of living during the retirement period.

What could be wrong with the design of national pension schemes in Ghana? Although the new three-tier scheme blends the benefits and characteristics of DB and DC plans, the concentration of a chunk of contributions (11.5% out of 18.5%) in the first tier DB plan could be the avoidable risk. Traditionally, the first tier is just like the 1972 Social Security Pension Scheme which invested in low risk low-yielding long-term government bonds, which are inevitably susceptible to the depreciation effect of high inflation. In effect, higher returns on pension investments are compromised for certainty (low risk). It appears to me that the desire to satisfy government needs is to blame; yet, historically funds have been wasted mostly in unproductive and unviable investments. Therefore K.B. Asante “maintained that SSNIT money was not government money but contributions by workers and would have accrued to workers if the SSNIT law did not exist”. Reports reveal that SSNIT spends about 40% of members’ contributions on administrative expenditure. Lately in 2012, the Director-General of SSNIT admitted that some of its investments in some companies had gone bad. A typical example is the State Transport Corporation (STC) bankruptcy case, making losses in the last five year prior to the reportage. Similarly, the two central car parks constructed by the SSNIT adjoining the Ridge Towers and the Pension House have been deserted by the target clients – workers of the various corporate institutions located around Ridge and Heritage Towers in Accra according to investigations conducted by Economy Times. The car park at Ridge has a parking capacity of 818 cars, but less than 150 cars patronise it daily due to high rates charged by the Trust according to the Economy Times. The very recent distasteful deal is the Fortiz-Merchant bank sale. The SSNIT has demonstrated in no uncertain terms its capability and capacity to manage the public pension fund to maximize profits for its agents in the public interest. It is therefore, a wrong decision to allocate more funds to the SSNIT – it is likely to go waste and pensioners may continue suffering.

Further, pension reforms have barely made it possible for contributors to benefit from their contributions while alive - during their economic and active lives. The only provision is found in section 103 (2) of ACT 766, which allows members to secure a primary mortgage with their accrued second-tier DC benefits; this is however yet to be implemented and of no benefit to members currently. There is doubt about the feasibility of this provision as well because accumulated benefits could be very low due to low contribution rate (5.5% of salary). This is worsened by the fact that a chunk of contributions are invested in DB plans managed by the SSNIT. The problem is that, this scheme buys deferred annuities for contributors to be received upon retirement. The fact that these annuities are received each successive year expands the risk of members realizing and actualizing their pensions with substantial real value due to high inflation; the very essence of the Pension Irrelevance Theorem (PIT) has barely been noticed by stakeholders. Members therefore live with the hope of longevity less they would not personally have access to their pensions but their survivors. In that case, it could be concluded that pension schemes in Ghana have predominately been for the benefit of survivors in title, not contributors. The lump sum benefits promised by the second-tier DC scheme could partially mitigate the PIT intrinsically. The extrinsic benefit of the DC scheme is meagre just by the simple reason that the promised lump sums are likely to be small because the contribution rate of 5.5% is insignificant for investment purposes. This is worsened by the fact that each member’s contributions in the DC scheme is ring-fenced and invested individually; thus, it lacks the benefit of risk and fund pooling as well as investment diversification. The latter requires substantial funds to achieve; hence, members would inevitably carry substantial specific (diversifiable) risk against Modern Portfolio Theory and investor rationality. This is quite technical and would be discussed in a separate article soon.

Remedy and Conclusion

Pension contributors’ best bet in the face of the PIT and moral hazards, is to have more control over the investment of their contributions through the DC scheme. In other word, dealing with the design risk of the new scheme requires that the chunk of contributions should be in the DC scheme for maximum benefits economically. There is a high likelihood that a higher second tier DC contribution rate than the first tier DB could lead to higher accumulation rates and the insufficiency of investible funds problem addressed. To deal with PIT, two non-mutually exclusive approaches are opened to administrators. First, benefits should largely compromise of a provident fund as argued above and secondly, many ways should be devised for contributors to benefit from their pensions while alive. In effect, risk reduction, diversification and return maximization is more likely for pension contributors in Ghana in this proposed framework.

In conclusion, the Pension Irrelevance Theorem is real and still a problem against the need for pension schemes in Ghana. The life changing root lessons from triggers of pension reforms have not completely been learnt. The knowledge-base informing the design of the new pension scheme is sideline and symptomatic in nature. Unless dealt with through robust pension scheme design, contributors would not benefit maximally, others including pension administrators, trustees, managers and custodians would.

Kenneth A. Donkor-Hyiaman

kwakuhyiaman@gmail.com

The Search for Sustainable Housing Finance in Ghana: The New Pension Law, 2008 (Act 766) in Perspective

The history of Ghana’s housing finance system has been chequered with failed attempts to establish an efficient mortgage finance system; which is touted as the most capable and superior financier of housing. The mortgage market in Ghana like many developing economies is a form of Braudel’s Bell Jar; which according to Hernando De Soto skews the market to the rich. This market is conceptually set within an economy of weak institutional property law, which undermines the intrinsic basis of a mortgage; the guarantee of property as security for a loan is hugely constrained.

This coupled with a lack of or inadequate sources of long-term finance, low income levels, high and increasing inflation rate as well as exchange rate fluctuations, the lack of refinancing and reliable credit rating mechanism are symbolic of a risky lending environment; thus, serving as a disincentive to long term investments. The composite of these factors has resulted in the current astronomical mortgage interest rates, averaging 30%. Hence, about 90% of Ghanaians made up of the low and middle-income earners are excluded from the mortgage market.

The maximum term of a mortgage in Ghana is 20 years whereas its 30 years in most developed economies. Undoubtedly, a long-term source of funding reduces the interest rate and monthly mortgage repayments and thus improves affordability. According to the SSNIT, only 112,522 out a total membership of 1,390,945; representing approximately 8% are pensioners. Research has also revealed that the majority of SSNIT members are between the ages of 31-40 years and have worked for less than 16 years. Interestingly, just a hand full of the members in this age group can afford a mortgage to purchase the least developer built unit of about GH¢30,000. However, they have about 25-30 years more to work towards retirement.

The above statistics reveal that the SSNIT has a youthful pension membership which presents the 2^nd tier of the new pension scheme as a possible source of longer term mortgage finance than hitherto. Section 103(2) of the National Pension Law (Act 766) allows a member to use that member’s 2^nd tier benefits to secure a mortgage for the acquisition of a primary residence. Similar provisions in the pension laws in most countries in Southern Africa and Singapore has engineered what has emerged as pension loans and pension-secured loans for housing.

Pension loans are direct loan from the fund, which is secured by the fund in two ways: over the member’s accrued benefits or effectively as a mortgage loan in favour of the fund over the property in question. Pension-secured loans enable contributors to secure housing loans with their accumulated benefits from third party; the pension fund (or administrator) in this case acts as a guarantor. This allows members to release the equity in their pension to improve their housing situations.

 Why Pension Loans and Pension-Secured Loans are Feasible: The Propositions

Pension funds having long-term liabilities have long-term investment horizons. It is therefore a prerequisite in eliminating liquidity risk premium and the potential maturity gap created by the use of short-term assets in financing long-term liabilities. This inures pricing benefits to the borrower; for instance, loans are priced at the prime rate in South Africa, relative to traditional mortgages.

Providing an alternative impetus for loan underwriting and pricing, pension assets enhance the viability of contributors as good borrowers regarding the 5Cs lending criteria. The amount and frequency of pension contributions are a readily effective means of assessing the credit worthiness of a borrower; as the regularity of payments could serve as a proxy and substitute to character and capacity. Accumulated pension contributions are a relatively liquid form of collateral and simultaneously provide live capital towards mortgaging; unlike the many houses without proper title in Ghana.

Repayment of pension loans and pension-secured loans is senior-subordinated to mortgage repayment. This means that the 2^nd tier contributions are deducted before mortgage obligations. Thus, a lender is relatively more secured upon loan default. Further, the positive co-movement of house values and inflation makes it a viable investment in very high inflationary economies with little or no inflation-hedging investment vehicles aside the potential of strong future cashflow generation where rented out.

With 24.36% equity in HFC Bank, Cal bank (34.4%) and Ecobank Transnational Incorporated (9.04%), the Social Secuirty and National Investment Trust (SSNIT) of Ghana  is prominent for its role in housing development and indirect financing of mortgages. Yet majority of SSNIT members cannot afford this mortgages because these two roles are disjointed. The Central Provident Fund of Singapore remains a quintessence; about 81% of the Singaporean population own an HDB flat, and over 95% of the adult population are homeowners largely due to pension and pension-secured loan (HDB 2000; McCarthy, Mitchell and Piggott, 2001).

Although Section 103 (2) of the Pension law of Ghana is clear on the intention of the 2^nd Tier mandatory pension scheme in support of a contributor’s first mortgage, it is vague on the form in which it should be utilized: pension loan and or pension-secured loan? More so, the law does not specify the threshold of borrowing and whether it should be used for a down payment and or repayments. 

Pension loans and pension-secured loans as a possible source of long-term finance will eliminate liquidity risk and the maturity gap problem which contributes to high interest rates on mortgages. They present competitive pricing advantages to the borrower than the current traditional mortgages. This will improve borrowers’ affordability positions and expand mortgage funding opportunities as well as increases mortgage market participation. It will achieve efficiency by providing funds to the low and middle-income earners who need it most than hitherto, but its sustainability is a question of further research.

In a country where pension benefits are meagre, the value of which has also been eroded by high inflation, the dilemma is whether making compulsory contributions to a pension fund is feasible? This is even worsened by the fact that life-expectancy is dropping rapidly as most contributors may not live to enjoy retirement benefits. This confirms the findings of previous researchers that most people forced into a pension fund do not benefit from it. What is the use even where beneficial to be assured a comfortable pension without a roof over one’s head today?

Kenneth A. Donkor-Hyiaman

kwakuhyiaman@gmail.com

Pension Irrelevance Theorem: Optimizing Pension Equity in Developing Economies

1.0 Background

Pensions the world over are social policy initiatives to plan for retirement; a certain end state in the lives of every working person. The period following the end of an active working life usually comes with income shortages even when it is available, which could lead to a fall in living standards of retirees. As a safeguard, social policy makes retirement planning a major agenda for many governments, trade unions, employers and employees in the wake of optimizing retirement welfare. Pensions have therefore evolved as a tool to secure the future of citizens. In simple terms, the common understanding of pension is that it is fixed sum of money paid to persons commencing from retirement from service usually via a scheme or plan. Often pension plans require both the employer and employee to contribute money to a fund during their employment in order to receive benefits upon retirement. It is a tax deferred savings vehicle that allows for the tax-free accumulation of a fund for later use as a retirement income. Pension plans are therefore a form of "deferred compensation".

A vast typology has emerged in different countries to describe pensions. For instance, pensions are referred to as “retirement plans” in the United States, “superannuation plans” in Australia and New Zealand and “pension schemes” in the United Kingdom. In spite of the varying terms, three basic designs (types) of pensions schemes are common globally including defined benefit (DB) plans, defined contribution (DC) plans or both. DC plans by nature specifies contributions as a predetermined fraction of salary without certainty of benefits upon retirement unlike DB plans. The latter is a promise by a sponsor bearing responsibility to pay a fixed life annuity; sometimes inflation-adjusted and benefits are a function of both years of service and wage history. Whereas member contributions are ring-fenced and individually invested in a DC model, DB enables the pooling and group management of funds. Investment risk is emergent at two levels; investment performance uncertainty and the real value of income streams or lump sum generated at retirement. Therefore, DB plans offer superior risk-sharing properties that are not captured by DC models.

2.0 Who “Benefits” from Pensions

Pensions are typically in the form of a guaranteed life annuity, thus insuring against the risk of longevity. In normative terms, all members of a scheme are intended to benefit from pensions. However, the general reality in many developing economies makes the need for pensions a rhetoric and a mere transplant of a foreign ideal, ignoring the under-currents of real welfare needs. For instance, life expectancies in many developing economies are substantially low, and many pension scheme members may not live to enjoy the benefits of pensions. According to the UNDP Human Development Report 2013, the Sub-Saharan Africa life expectancy average as at 2012 is 54. 9 years, 64.6 years in Ghana, 57.5 years in Kenya and 52.1years in Cameroon. Noting that compulsory retirement age in most developing economies is around 60 years upon which retirement benefits are paid, pension schemes may be unnecessary.  Thus, pensions are unreachable and a mirage to many. The majority of those who survive after retiring at 60 years are normally expected to demise shortly. In that case, such people may have contributed for over two decades, sometimes four depending on when a person is employed; yet enjoys meagre pensions for usually less than a decade as reported in many developing economies. In Ghana, future pensioners born in 2012 are expected to demise at age 64; hence, receive pensions for a likely four years.

At the group level where people can be classified by income, the insignificance of pension schemes is further perpetuated in many liberalized developing economies. It is widely observed that low and middle-income people have low life expectancies compared with high-income people all things equal. Very often, high-income people have access to resources to live a high standard of life and for that matter longer. This includes access to systems and life enhancing information, which low and middle-income people predominantly lack. Moreover, the nature of pension schemes favours high-income contributors, as benefits are mostly directly linked with the contribution rate. In other words, many low and middle-income people can only afford to contribute little and consequently earn little pensions upon retirement, which in most instances is devalued by high inflation. This is the case in many developing economies. Moreover, the fact that pensions are periodic payments unlike lump sums to be received commencing upon retirement expands the risk that many low and middle-income people in developing economies would not received pensions –  I refer to this as the “Retirement Planning Puzzle”.  This pushes the receipt of pensions further into the uncertain future. Unlike developed economies with high life expectancies making pensions important, low life expectancy in developing economies render the need for pensions unjustified.

In this article, I seek to present a theorem to begin a discourse about the irrelevance of pensions in developing economies – herein referred to as the “Pension Irrelevance Theorem” – and to propose a model to optimize pensions for the many low and middle-income pension scheme members. This is entangled in the “Retirement Planning Puzzle” phenomenon, defined as the difficulty in achieving the objects of retirement planning – thus the difficult in realizing and actualize pensions. Through a discussion of the popular “housing as retirement income” concept, I present some mechanisms which when woven into retirement planning could enable scheme members to reasonably benefit from their deferred pension equity (benefits) while a life. This could be a way to inject some efficiency into retirement planning; hence the need for pension schemes.

  

3.0 The Retirement Planning Puzzle

The assumptions underlying this puzzle are discussed below:

1.      Legal working age is 18 years and above. This is widely accepted as adulthood age at which persons are regarded as sound, matured and independent to make basic life decisions.

2.      Retirement age is 60 years in the majority of developing economies.

Observations

1.  Given a legal employment age of 18 years and retirement age of 60 years, many pension contributors would contribute towards pensions for approximately 42 years (i.e. 60 -18).

2.  Given that the average Sub-Saharan life expectancy is 54.9 years, many if not all pension contributors would demise before formal retirement age of 60 years.

3.     Based on observation (2), many if not all pension contributors would not receive pensions for that matter. Survivors would receive meagre pensions for less than a decade (10 years); precisely about 5 years.

  

Questions

1.     Why should people contribute towards pensions if they will not live to enjoy it?

2.     Is it possible for pension contributors to benefit from their deferred pensions during their working years?

4.0 Longevity and the Concept of Homeownership as Retirement Income

The concept of homeownership as retirement income is popular in many advanced economies including the United States, United Kingdom and Europe. This is based on the principle that home equity could be released via home equity loans and reverse mortgages as a substitute or complement to retirement income. High life expectancies averaging 70 and above in developed economies heightens the need for adequate retirement planning and therefore pensions. Housing as an asset in the mixed portfolio of retirement assets has proven to be a good portfolio diversifier, an inflation hedge and a deliverer of strong cash flow to members.

However, the essence of home equity as retirement income although cannot be understated, is not plausible in developing economies. This is because of the fact that many people in the low and middle-income brackets constituting over two-thirds of population in any developing country may not live after retirement age to release the equity that has accrued from their homes. It seems to me that there is an implicit assumption of homeownership; but it is common knowledge that the majority of low and middle-income people are renters rather than homeowners. Thus, there is no home equity to release to either substitute or complement other sources of retirement income. Further, their housing conditions are poor and inadequate and they lack the resources to access market-based formal housing finance facilities. Most often, there is lack of innovation in housing and housing finance design resulting in the pricing-out of low and middle-income people from the housing market. These conditions highlight the inefficiency in most housing markets in developing economies.

Nonetheless, the relevance of housing as an inflation hedge cannot be underestimated in developing economies with high inflation rates; a quality that retirement investments (i.e. mostly stocks and bonds) lack. Yet, the very people who need to tap this benefit to optimize their pensions largely do not own homes in their life time. Moreover, those who are able to enter into homeownership are very unlikely to release home equity because of the high desire to leave a bequest; a social value often enjoyed over the economic benefits of homeownership. Even in advanced economies, this phenomenon is true, although slight.  Thus, the dual likelihood of missing out on pensions and homeownership is very high, a phenomenon which questions the essence of pension schemes in developing economies.

5.0 Reversing the Pensions Irrelevance Theorem through Pension Housing Financing

The situation is however not hopeless, as the retirement planning activity could be tailored to enable pension contributors benefit from their deferred pensions while alive.  In other words, rethinking the “homeownership-retirement planning” philosophy by transposing the “homeownership as retirement income concept” into “retirement planning for homeownership” is vital in achieving this ideal. Shelter is one of the most important physiological needs of humans, which in this era comes in the form of houses. As the most significant component of household wealth and the most important form of savings, acting as a source of protection for household wealth against inflation in the long run; housing and homeownership are very important aspects of human values, which does not only provide shelter but serves as a measure of social standing and prestige.  Home ownership in any form is important, but owner-occupation grants individuals and households more independence, freedom, more choices, better investment opportunities and the ability to borrow against future income. Therefore, homeownership is one of the first priorities for most households in most developing economies, representing the largest single investment, taking 50% - 70% of household income.

“Retirement planning for homeownership” already happens in the market for pension loans and pension-secured loans in Southern Africa (predominantly in South Africa) and Singapore. Pension loans are direct loans from the fund secured in two ways: (i) over the member’s accrued benefits (which for the purpose of distinction could be referred to as Pension Equity Loans) and (ii) effectively as a mortgage loan in favour of the fund over the property in question. They are financed and administered internally (by the fund) or through a designated administrator depending inter alia on the in-house capacity, size and nature of the pension fund. The size of the loan is primarily determined by the accrued pension benefits which varies with time, size of contributions and returns earned from investments. Pension-secured loans enable contributors to secure housing loans by collateralizing their accumulated benefits to a third party; the pension fund (or administrator) in this case acts as a guarantor. The loan amount is limited to one third of the pension benefit outstanding at retirement age and should be repaid for a maximum period of 30 years within the normal retirement date. Repayment is bond-like in structure; monthly interest-only payments to the lender via direct salary (payroll) deductions during the term of the loan and the principal deducted from accrued pension benefits at the maturity of the loan.

Aside utilizing member’s (borrower) accrued pension equity (benefits), the pension loan model allows a member to effectively in principle borrow other people’s benefits as a mortgage. In this case, a borrower’s accrued benefits is conceptually considered as ‘capital’ (deposit towards mortgaging), whiles the accrued benefits of other members is employed as the ‘mortgage loan amount’ --- supplement to the tune of the house price. Whiles in the first model, the accrued benefits of a pension member is collateralized, the second model utilizes the house as the loan collateral. In effect, both models enable the activation of otherwise deferred pension benefits as spendable income towards the acquisition of a house. The Financial Services Board of South Africa notes that pension-secured loans amounted to R5 billion (£331.450 million) as at December 2005 and R10 billion (£662.900 million) in 2008 by Alexander Forbes. By 2009, pension-secured loan totalled R17 billion (£1.127 billion) (Sing, 2009); demonstrating significant growth in the industry. With average sizes of R19, 000 (£1,260), ±30% and ±70% of all pension-secured loans are from retirement funds and third-party loan providers respectively (ibid.). According to the Centre for Affordable Housing Finance in Africa (CAHF) (2012), there are about 850 000 outstanding pension-backed loans based on average loan size of about R20, 000. Default rates are low, reported at 2 percent in 2009 (ibid.). Pension loans and Pension-secured loans have proven to be a remedy to the Pension Irrelevance Theorem in South Africa.

Although the Pension Irrelevance Theorem may not apply in Singapore because of longevity, pension loans and pension-secured loans that have effectively connected their housing developing activities with housing financing has benefited low and middle-income earners. The Central Provident Fund of Singapore is a good example; about 81% of the Singaporean population own a Housing Development Board (HDB) flats, and over 95% of the adult population are homeowners. These systems have allowed for the collateralization of pension equity to better the housing conditions of low and middle-income households.

6.0 Applications of the Pension Irrelevance Theorem in Ghana

The Pension Irrelevance Theorem provides useful remedies for the Retirement Planning Puzzle in Ghana. The Pensions landscape in Ghana has undergone several developments since the colonial era. In 1946, the Government introduced a non-contributory pension scheme, which was the first pension program of its kind in the country, to cater for the retirement benefits of those who worked in the offices of the Colonial Administration. Later, in the early 60’s the “CAP 30” and Superannuation Schemes were introduced for certified teachers, university lecturers, and all government workers. The vast majority of ordinary Ghanaian workers could not benefit from these schemes. Therefore, the Social Security Act (No. 279) was passed in 1965 to cover all private and public sector workers who were not covered by the “CAP 30” schemes. The scheme was originally started as a Provident Fund to provide lump sum benefits for old age, invalidity and survivor’s benefits. Since its establishment, it is a fact that the Pensions Irrelevance Theorem has been operational and pensions have been less useful to pensioners.

 The transition to a broad investment portfolio required considerations that satisfied the needs of government on the one hand, the need to satisfy some social needs of the contributors and the need to generate commercial rates of return to balance the lower rates from the other portfolios. Hence, the passing of the New National Pension Fund Act, 2008 (Act 766) to establish a contributory 3-tier pension scheme is essential in providing workers with improved benefits and income security “before and after their retirement”. Unlike the former define benefit scheme (solely managed by SSNIT) which provided contributors with no window of choice in the investment of their contributions, the privately-managed defined contribution second Tier of the new three Tier scheme allows members better control over their pension benefits and investments.

Pension reform in Singapore has been quite successful in providing basic needs and social security for citizens in the country. About 27% pensioners take the benefits of their accounts to pay for housing. Section 103 (2) of the new National Pension Act, 2008 (Act 766) provides a similar leverage and potential remedy to the Pension Irrelevance Theorem. Perhaps, this is the most important provision in the Act which enables members to optimize the benefits from their pension equity while alive; their greatest and most certain asset now - many contributors may not live to enjoy pensions. It provides that “a scheme may allow a member to use that member’s benefit to secure a mortgage for the acquisition of a primary residence”.  In other words, under this new system, contributors may have access to some funds for specifically for housing, prior to retirement. It is this provision in the new legislation that provides the catalyst that establishes the legal background, making now the optimal time to consider proposals for pension housing financing in Ghana. This means that workers can obtain their own houses before retirement by using their pension equity benefits as collateral, as against the problematic traditional brick and mortar collaterals, which is a major constraint and source of high risk for mortgage lending in Ghana. Essentially, this should translate into decent housing for low and middle-income people and households. For those, who may live after retirement, homeownership provides an upside; that is, the concept of housing as retirement income could now be actualized. It is widely reported based on the Preferred Habitat Theory that the second Tier scheme could serve as a long-term source of housing/mortgage finance in Ghana. A feature which could solve the maturity gap problem of lending long with short term deposits as is the case currently. This could mitigate liquidity risk and reduce mortgage rates substantially; hence improving housing/mortgage affordability.

7.0 Conclusion

In summary, many pension contributors in developing economies would not live to enjoy their pensions; thus, negating the need for pension schemes. However, pension schemes could be made more malleable to create opportunities for members to use their deferred pension equity (benefits) to meet housing needs via pension equity loans, pension loans and pension-secured loans during their active lifetime which could subsequently serve as a substitute or complement to retirement income through home equity loans and reverse mortgages. The Retirement Planning Puzzle and the Pension Irrelevance Theorem could be reversed through the new concept of “retirement planning for homeownership” as proposed by this paper.

Kenneth Appiah Donkor-Hyiaman

kwakuhyiaman@gmail.com