Social Protection

for Older Women and Men

(Fighting Poverty through Pension Systems)

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 Income Security in Old Age

• ensuring income security for people during their old age is a

crucial objective among the welfare goals
• contribute to national development and progress throughout
their working life, when most people enjoy good health and
productive capacity
• it is fair that they are not left behind and that prosperity is
shared with them when they get older

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• require reliable mechanisms that ensure systematic
protection against risks of vulnerability of older
persons
• can access protection mechanisms through individual
efforts
– personal savings
– house ownership
– intra-generational family support mechanisms

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• the majority of the world’s population, especially in the
developing world, sources of income are unreliable even during
working age
• only a small fraction of the world population has the capacity to
fend for itself during old age
• social protection systems played a crucial role for older persons
• public pension systems have become a foundation on income
security for older persons
• income security in old age also depends on the availability of,
access to, and cost of other social services including health care,
housing and long-term care
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• if affordable access to such services is not provided, older
persons and their families can be pushed into extreme poverty,
even in developed countries
• in countries with wider access to quality public services, poverty
among older persons is also significantly lower
• based on the principle of universality, policy- and decision-
makers should take into consideration the construction of
comprehensive social protection systems in order to guarantee
that no older person is left behind

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 Types of Pension Schemes

• periodic cash benefit through at least one scheme and often through a
combination of different types of contributory and non-contributory
schemes
• lump-sum benefits
• only contributory schemes under a social insurance scheme
• exclusively through non‑contributory schemes, the majority provide
universal coverage
• combination of contributory and non-contributory schemes is the
most predominant form of organization of pension systems in the
world
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 Legal Coverage

• right to income security in old age is unfulfilled

• considerable inequalities persist

• legal coverage for women is somewhat lower than that for the
entire population
• largely reflects their lower labour market participation rates
and their over-representation among those working as self-
employed or unpaid family workers

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 Effective Coverage
• income protection of older persons is the most
widespread form of social protection, showing significant
development over the last few years
• regional differences in income protection for older
persons are very significant
• coverage rates in higher income countries are close to 100
per cent
• only 22.7 per cent in sub-Saharan Africa
• 23.6 per cent in Southern Asia 8
• contribution evasion and fragile governance
(including lack of institutional capacity to ensure
enforcement of laws) are also more prevalent in lower
income countries
• efforts to extend contributory schemes to all with
some contributory capacity
• introduction of non-contributory pensions in a
larger number of countries
• coverage has been extended significantly to workers
in informal employment, providing at least a
minimum of income security in old age

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 Trends in Pension Coverage
across the World

• there is still room for improvement

• a significant number of countries across the world

have achieved substantial progress in terms of

effective pension coverage in recent years

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 Expenditure on Social Protection
for Older Persons
• level of expenditure on the income security of older
persons is a useful measure for understanding the
development level of pension systems
• national public pension expenditure levels are
influenced by a complexity of factors
– demographic structure
– effective coverage
– adequacy of benefits
– relative size to GDP
– variations in the policy mix between public and private
provision for pensions and social services
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Inequalities and The Persistent Gender Gap

• income security in old age and access to pension benefits

are closely associated with the inequalities that exist in
the labour market and in employment
• women tend to face a higher risk of poverty than men
• contributory pension coverage of women tends to be
significantly lower than men’s
• the amounts received by women on average tend to be
lower
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• women live longer

• women’s wage employment, particularly in formal

labour markets, has historically been lower than men’s
• women tend to take on a greater share of family
responsibilities
• more likely to shorten or interrupt their employment
careers
• face a higher risk of working in precarious and
informal employment 13
• in many parts of the world, women are disproportionately
represented among the rural population
• movement of men to cities in search of better-paid work at the
more formalized end of the labour market
• non-contributory pensions can play a key role in ensuring
women’s access to at least a basic pension
• benefit levels are often low, insufficient to fully meet their needs
• growing importance of non-contributory pensions in the
provision of old-age income, especially in low- and lower-
middle income countries, is clearly helping to bridge the
coverage gap between men and women to some extent 14
• measures to facilitate a more equal sharing of care

responsibilities between women and men contribute

to addressing some of the inequalities in the labour

market and pension systems in the long run

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 Adequacy of Pensions to Provide
Genuine Income Security to Older Persons
• twin objectives of pension systems
– to reach all older persons in need
– to do so at an appropriate monetary level of benefit
provision
• adequacy of retirement benefits depends not only on
the quantum of the cash benefits provided, but also
on the costs of essential services such as health care,
food accommodation, and so on
• assessment of the adequacy of retirement benefits is
dynamic
• evolve over time as social, cultural, demographic and
economic conditions change 16
 Preventing Erosion of the Value of
Pensions Over Time
• an important consideration on the adequacy of pensions
is their ability to retain their purchasing power and
real value
• a good practice in the design of pension systems is the
establishment of an initial income replacement at
retirement, and then ensuring the preservation of such
income level for the life of the retiree
• unless the quantum of pensions is adjusted or indexed,
the standard of living of pensioners will be
jeopardized
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 Indexation Method

pension benefits are adjusted to take into account changes

in the cost of living
• Price indexation
• Wage indexation
• Mixed price/wage
• Regular, not specified
• Ad hoc
• No indexation
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• Price indexation-pension benefits are adjusted taking
into account changes in prices
• Wage indexation-pension benefits are adjusted taking
into account changes in wages
• Mixed price/wage-pension benefits are adjusted
taking into account changes in both wages and
prices
• Ad hoc- provides for discretionary increases only,
with no guarantee of any future increases
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• choice of an indexation method can have a
significant impact on the level of pensions, and
consequently on expenditure on pensions
• Where wages increase faster than prices, the change
from wage-based indexation to price-based
indexation offers significant reductions in pension
expenditure but also leads to the decoupling of
pensioners’ living standards from those of the
working population
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 Reforming Pension Systems
(fiscal consolidation and austerity policies)

• many countries have introduced a series of adjustment

measures
-increasing penalties for early retirement
-raising the statutory pensionable age

-indexing the retirement age to increases in life

expectancy
• affect eligibility conditions and delay pension receipt
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• between 2010 and 2016, a total of 169 contraction
measures in pension schemes were announced by
governments from various regions of the world,
mainly in regard to contributory pension schemes
• most reforms were related to delaying pension
receipt
• included raising the retirement age, the elimination of
early retirement, the introduction or increase of
penalties on early retirement, the introduction or
increase of incentives for late retirement
• some reform measures targeted at increasing the
eligibility period or tightening eligibility criteria
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• 37 cases of reform announcements by governments
that have reduced the adequacy of pensions
• include 25 cases of reform that have decreased
pension benefits, modified the calculation formula,
eliminated or reduced subsidies on benefits, or
decreased subsidies on contributions
• 12 reform measures have reduced pension system
adequacy by reforming the indexation method,
freezing pension indexation and introducing or
increasing taxes on benefits

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• In the context of the aims of Agenda 2030, it is

important to consider the need for pension reforms

that reach the most vulnerable groups, guaranteeing

social protection floors for older persons excluded

from contributory pension benefits

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 Reversing Pension Privatization

• Lessons from three decades of pension privatization

• Turning back to public pension systems

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 Lessons from pension privatization
• in the 1990s, many countries introduced structural reforms to their
pension systems
• move from the public defined benefit (DB) model to defined contribution
(DC) with individual accounts and private administration model
• In DB schemes, the amount a pensioner will receive depends on the
number of years of contributions made throughout the working life and
on some measure of individual earnings from work
• In DC schemes, each worker has an individual account in which
contributions are saved and invested, and the accumulated capital is
usually converted into a pension-income stream at retirement; lump-sum
withdrawals are rarely permitted 26
• structural reforms entailed setting up privately managed and
invested pension pillars with defined contributions, investing
people’s savings into capital markets
• structural reforms shifted responsibility and financial burden
from the public sector and changed the way old-age security was
viewed
• in the developing world, a significant proportion of older and
unskilled workers are moving from formal jobs, with social
protection, to informal ones or to unemployment
• makes it difficult for them to meet the legal requirements for a
contributory pension
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 minimum number of contributions, the retirement age and
other related parameters must be handled with caution in order to
ensure that the social protection system meets its objective of
protecting all older persons

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• World Bank’s privatization strategy involving the replacement of
social insurance by mandatory savings schemes
• cause an unacceptably high degree of risk for workers and
pensioner
• make old-age protection more costly
• transition would impose a heavy burden on the current generation
of workers
• a more efficient and less disruptive approach to the provision of
retirement pensions would be to focus efforts on measures to
rectify design deficiencies and inequities in public schemes
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 After three decades of privatization reforms
• Low coverage
• High administrative costs
• Lower pension benefits and replacement rates
• High fiscal costs
• Lack of social dialogue

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Low Coverage
• introduction of individual accounts increased neither coverage nor
compliance rates
• coverage rates and benefit levels stagnated or decreased in most countries
introducing individual accounts

High Administrative Costs

• costs rose to high levels, well above the pre-existing levels in the old public
systems
• extensive documentation of the high rates of administration of individual
account systems
• high management fees and high premiums for financing survival and
disability insurance 31
Lower pension benefits and replacement rates
• risk of financial market fluctuations was left to pensioners
• risked losing their total life savings if financial markets
collapsed, as happened during the global financial crisis
Lack of Social Dialogue
• Social dialogue is defined by the ILO-
• to include all types of negotiation, consultation or simply
exchange of information between, or among, representatives of
governments, employers and workers,
• on issues of common interest relating to economic and social
policy 32
Turning Back to Public Pension Systems
• pension privatization reversals coincided with the 2008
financial crisis
• increased pressure on countries that had already been coping
with external fiscal constraints
• as a consequence of unmet expectations and the fiscal
challenges, many countries elaborated ways to reverse their
policy measures undertaken in the 1990s

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 Ensuring Income Security for Older
Persons: the continuing challenge

• great progress is being made globally in terms of extending

legal and effective coverage of older persons
• major coverage deficits persisting in most of the developing
world

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major obstacles in extending coverage to older persons

• lack of political will, which is however essential in supporting

the development of a well-functioning pension system
• lack of fiscal space for the financing of pension systems and to
prioritize expenditure in social protection measures for old age
in the long term
• high levels of informality, in particular in low- and lower
middle-income countries
• the challenge of building trust among contributors and
beneficiaries
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• a positive trend throughout the developing world is the
proliferation of non-contributory pension systems
• however, schemes are often too narrowly targeted, leaving many
people unprotected
• a challenge for these countries is to transform their systems into
universal ones in order to guarantee a floor of income security
for all older persons, leaving no-one behind
• in most parts of the developing world, the focus is on extending
coverage
• in high‑ and upper middle-income countries focus on pension
adequacy issues and financial sustainability, and on how to
maintain the systems 36
• with ageing demographic structures and mature pension systems,
the main challenge in most developed countries is maintaining a
balance between adequacy and sustainability
• the reversal of the pension privatization in the 2000s reintroduced
or strengthened the public schemes based on the concept of
defined benefits, with elements of solidarity and redistribution
• great progress has been achieved in income security of the older
person, in particular in terms of coverage extension
• in order to comply with the SDGs, countries must double their
efforts to extend system coverage, at the same time as progress is
made towards improving the adequacy of benefits
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