Pension systems and prospects in Asia and the Pacific

There is a diversity of pension systems in the Asia and Pacific region. A growing number of countries have social insurance pension schemes, but many others which have provident funds have not set up any mandatory pension system at all. Demographic, social and economic changes mean the need for a regular income in old age will increase enormously. Existing schemes should be extended to all employees, benefits should meet certain minimum standards, administrative arrangements must adapt to structural change, and the budgeting both of governments and of households must be adjusted to take account of changing age dependency ratios.     

The Current Situation of Retirement Income Provisions in Japan: Social Security Pension Schemes and Corporate Pension Plans

Japan has been faced with rapid population ageing for decades. This has continuously reduced the level of social security pension benefits. Based on this it is often said that corporate pension plans should play a wider role forward in providing retirement benefits. However, we also have to know that there is a limit to what corporate pension plans can do in place of the social security pension schemes. In this paper we extract lessons from the history of social security pension schemes in our country and try to define the roles of corporate pension plans and social security pension schemes. In conclusion we should keep adequacy of social security pension benefits even if the contribution rate becomes a bit higher. Corporate pension plans just enrich people's life in retirement. We have to remember that corporate pension plans were not certain means for reducing the poverty in old age and that for this reason social security pension schemes by social insurance were invented.     

The impact of tax-financed pensions on poverty reduction in Latin America: Evidence from Argentina, Brazil, Chile, Costa Rica and Uruguay

In many Latin American countries, tax-financed pensions (TFPs) have expanded, mainly resulting from growing informalization of employment and stagnating or declining pension insurance coverage. In the five countries examined in this article, TFPs have generally been effective in reducing poverty and indigence. In Brazil rural social assistance pensions cut the incidence of destitution among poor older people by 95 per cent. In Chile TFPs considerably improved their poverty reduction effectiveness between 1990 and 2000. Tax-financed pensions have therefore been seen as an instrument to supplement contributory pension coverage and boost overall social security coverage. A key challenge is to increase pension insurance coverage through existing statutory pension insurance or special contributory schemes targeted on workers in the informal economy. Otherwise, TFPs could become financially and socially unsustainable in the future. There are also various ways to improve the financing, administration and eligibility criteria of TFPs, particularly because it is necessary to define consistent structure and benefit policies between these and contributory schemes.     

Designing a social security pension system

Abstract   This paper looks at potential models of social security pension systems. It refers often to the systems that exist in the United States and Canada (the latter more particularly) to outline the issues involved in attempting to design a "good" social security pension system. Of course, one of the issues is the definition of "good". This paper will use criteria such as poverty alleviation, retirement income adequacy, benefit/contribution sustainability, income equality and wealth distribution. In the course of the discussion, the reader will be exposed to many issues that need to be addressed in the establishment of any social security pension system in the world. This may prove to be helpful in countries where new systems are established (and even for evolving systems). It is also hoped that future students of social security will find this paper helpful in that it is meant to lay out some basic principles consistent with good social security pension design.     

The performance of social security contributory and tax‐financed pensions in Central America,and the effects of the global crisis

Over the last 30 years, Latin America has pioneered structural pension reforms. This article focuses on a representative regional sample of seven Central American countries with diverse levels of development (Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama) studying contributory and tax‐financed pensions as well as recent pension reforms. It comparatively assesses system performance regarding five social security principles: unity; universal coverage; adequacy of benefits; equal treatment, solidarity and gender equality; and financial sustainability. It also evaluates the impact of the world crisis on these pension systems, highlighting the differences between public and private pensions, and extracts lessons and suggests policies for the future.     

Low Public Expenditures on Social Welfare: Do East Asian Countries have a Secret?

This paper explores the sources of low public expenditures on social welfare in Japan, Korea, Taiwan, Hong Kong and Singapore. Six factors are analysed based on aggregate data: the public/private mix of welfare programmes, the age structure, the maturity of old-age pension schemes, the population coverage of social security, the relative generosity of social security and the role of enterprises and families as alternative providers of welfare. The evidence allows putting some conventional statements about the virtues of East Asian welfare states into questions. Public expenditures on welfare are bound to rise a lot in Japan, Korea and Taiwan, while the level of protection in Hong Kong and Singapore is well below the standards of Western countries.     

Equity and Redistribution Between Generations: A Challenge for the Future of Pensions and all Social Protection Schemes

Throughout Europe today, the problems of employment and the prospects of pronounced demographic ageing combine to raise a number of questions on the future of pensions and on the underlying principles of redistribution between generations. Everywhere a new debate has arisen on intergenerational equity. It has often served as the justification for pension scheme reforms introduced or pending in most countries. Some clarification is needed on what is actually meant by intergenerational equity, all the more so with the ongoing complexity of the scientific and political arguments on the subject. In this paper I attempt to show, on the basis of information derived from my research, why a financial view of intergenerational redistribution seems inadequate and how, in discussing the future of such redistribution, there are new forms of life cycle organization and redistribution of worktime and compensated inactivity across this life cycle that need to be considered. This paper aims to show that in considering the future of pension schemes and the prospects of a contract between generations one must take into account the manner in which the distribution of work operates between all ages and across the whole life cycle, in relation to the structure of social security. Welfare states today constitute an inextricable tangle of risks and coverage systems. In such circumstances it would seem rash to countenance the kind of public pension reforms that have been envisaged by a number of member countries of the European Union, not leastFrance, without taking into account the close relationship that now exists between pensions, unemployment insurance and disability. Reform in one sector cannot meet the challenge of the ageing population in our developed societies.     

From pension funds to piggy banks: (Perverse) consequences of the Stability and Growth Pact since the crisis

As part of their strategy for economic and monetary union, European governments committed themselves to fiscal discipline – particularly by placing limits on annual deficits and on public debt. Subsequently, and as they sought to respond to the “current crisis”, they embraced the view that only if public finances were kept under control would sustainable recovery be possible. Rules of fiscal governance were strengthened. To help them meet these rules, the governments of many member States of the European Union made changes to their pension systems or to funds they had established specifically to pay the costs of population ageing. The intention was not to cut retirement benefits or to improve the efficiency of the relevant pension schemes and institutions. Rather, it was to free up resources immediately. Funded pension schemes and pension funds were treated like “piggy banks” that were raided when times became hard. Moreover, the policies pursued succeeded in meeting their objectives only because the system of national accounts according to which outcomes are judged does not recognize the way in which most of the fiscal gains are matched by future fiscal liabilities.     

Financial management and control of supplementary pension schemes

As a result of demographic, financial and other pressures on social security schemes, governments are increasingly seeking to promote the development of complementary pension schemes and a partnership between the public social security system and private provision through occupational pension schemes or individualized pension arrangements. This paper considers the different aspects of complementary pension schemes which might be subject to some degree of regulation and deals briefly with some of the options available for establishing a satisfactory system of regulation and supervision.     

Pension insurance and the participation of private enterprise

One of the principal developments of our time in the field of social security policy has been the growing importance of the desire of individuals for greater economic security in their old age. This desire has in its turn given rise to an increasing tendency to seek benefits complementing those offered or promised by public social insurance schemes. In Europe and North America private enterprise has for many years played an active role in the field of complementary provident arrangements; but in the countries of Latin America interest in schemes of this kind has only begun to develop in recent years. A study of the present situation shows a need to establish concepts permitting an objective approach to the problem of whether — and ultimately, how — a modern State can succeed in striking a satisfactory balance between public intervention and private enterprise in the field of provision against deferred risks or, if it cannot do so, what the prospects are for the securing of a better future by present-day society and how that goal could be achieved. A reform of provident systems in Latin America is inevitable. The difficulty lies in determining how to reorganize public systems so as to ensure their continuance and to entrust them with the principal role in ensuring social solidarity while at the same time opening up opportunities for free private complementary insurance.     

Micro‐pensions in India: Issues and challenges

This article aims to fill a gap in the social security literature on India by examining the role of micro‐pensions. The analysis suggests that because of the heterogeneity of the target population, micro‐pension products — with microfinance institutions (MFIs) as the main, but not only sponsors — should be voluntary and portable and permit experimentation in their design and in the delivery of services. Accordingly, decentralized micro‐pension schemes that operate within an appropriate regulatory framework and according to sound governance practices are deemed more fitting for the Indian context than centralized schemes with limited flexibility. The article discusses two case studies of recently‐initiated micro‐pension schemes in India, which reveal the need for rigorous analytical research on the micro‐pension sector, particularly concerning the structuring of pay‐out options and innovative delivery mechanisms. The article concludes that micro‐pensions have the potential to be one of the most useful components in India's multi‐tiered social security system, and should be encouraged.     

The challenge of pension reform in Georgia: Non‐contributory pensions and elderly poverty

Georgia's national social security system offers almost universal non‐contributory basic pension coverage. The basic pension has, to date, proved effective in dealing with old‐age poverty. But Georgia's fiscal constraints and ageing population also highlight the importance of improving the pension system, in order to ensure its sustainability. This article presents policy reform choices, which suggest that, in Georgia, pension reform might include increasing the statutory retirement ages and reducing the generosity of benefits through means testing. The case of the Georgian non‐contributory basic pension might hold value for some low‐ and middle‐income countries that are considering the implementation of, or expanding coverage under, a non‐contributory pension programme.     

Developmentalism in Korea: A Useful Tool for Explaining the Role of Social Security in the Reduction of Poverty and Inequality

It is conventional wisdom that universalism is more effective than selectivism in addressing the problems of poverty and inequality. In providing income security for the elderly, retirement pensions calculated on the principle of social insurance represent universalism and social assistance benefits on the basis of means-test selectivism. Korea has both a contributory pension scheme and social assistance program for the elderly. The social assistance began in 1961. The contributory scheme, the National Pension, started belatedly in 1988 and its coverage expanded to the entire population in 1999. We can, therefore, expect that the social security system, especially the universal pension scheme based on social insurance, has some positive impacts on the reduction of poverty and inequality. This paper, however, raises doubt as to the conventional wisdom and thus reviews the developmental process of the Korean social security system for the aged. It was found that the dominant ideological controversy revolved, not around universalism versus selectivism, but around the option between developmentalism and other strategies. Our empirical analysis showed that the public pension had little impact on the reduction of poverty and inequality, particularly in comparison with advanced welfare states. This is not surprising at all, since poverty eradication and redistribution were not major objectives of the Korean social security system. The controversy between universalism and selectivism was relatively unfamiliar in the policy process of the Korean social security system. Even though the redistributive effect is getting larger as the National Pension system becomes mature, the developmentalist model has been proved to be a more useful tool for explaining the limited role of Korean social security.     

Pension Provision for Specific Risk Groups: The Japanese Case

The growing variety of possibilities in one life course raises coverage, fairness and social adequacy questions about existing public pension provision. This paper examines problems of drop-out, full-time housewives, carers, divorced or remarried people and those engaged in atypical work in Japan. A possible solution will be a universal basic pension financed by a consumption-based tax. It is also advisable to expand social security coverage of the earnings-related pension to any earners irrespective of their earnings amount, if any. In implementing this provision, an integrated single social security pension number for each person is required, and this has already been introduced in Japan. The 1999 government reform plan for pensions is also mentioned.     

Old age protection in India: Problems and prognosis

This paper reviews the current state of the Indian pension system. The Indian experience could potentially influence policy decisions in other developing countries, especially those with similar reliance on the national provident fund system. Institutional features of various retirement benefit schemes are highlighted and their deficiencies are discussed. It is argued that low coverage level, underperformance of provident fund schemes due to investment restrictions, and financial difficulties in administering unfunded public pension programmes have rendered the current system ineffective and unsustainable. The failed experiments with ad hoc reform initiatives in the recent past further emphasize the need for a structural and lasting change. The paper concludes with some policy directions for reforming the Indian pension system.     

Social protection for the family in the Maghreb

This article is based on a study of the protection afforded to the family under the social insurance schemes of the five Member States of the Arab Maghreb Union, and considers the usefulness of family benefits in economically poor countries gripped by the great problems of population growth and unemployment. This type of social protection is conditional upon the individual being actively employed and covers only a very small part of the working population, leaving out the majority. Should not priority be given to coverage against real occupational risks that threaten employment? This is not an easy question to answer in an increasingly unfavourable economic climate, but it should be possible, in the name of those social and human ethics founded on Maghrebi sentiments of family, local, national and regional solidarity, to mobilize particularly the political will to find better solutions or alternatives. It will, however, be necessary first to reconsider family benefit systems in relation to other, more urgent forms of protection in accordance with a social choice based on the rights and cultural values of Maghrebi citizens. By showing the common features of the Maghrebi schemes at the same time as some of their differences, the article will also present useful elements for their harmonization and even their unification into a regional social security system.     

Extending social security protection to the entire population: Problems and issues

Rural, agricultural and informal-sector workers have often beendenied the social security protection to which other economic sectors of populations have had access, and this is particularly true in the case of developing countries. There are also other important groups which have few or no rights to social security protection, such as family, domestic and casual workers. The lack of coverage is disturbing, as witnessed by the frequency with which this topic appears on social security meeting agendas worldwide, and particularly so since these sectors, as a whole form a very large proportion of the populations of many countries. Certainly there are difficulties of a practical nature which inhibit extension of coverage to these groups. So what can social security systems do? What kind of coverage is best suited to the needs of these groups? This article, based on papers presented at an ISSA Regional Meeting for Asia and the Pacific held in Manila in 1992, analyses the issues and makes some suggestions for a strategy relating to extension of coverage.     

Privatization, provision, and targeting: Trends and policy implications for social security in the United States

This paper examines several important trends in the changing structure of social security in the United States and their impact on the elderly in different income groups. These trends involve the shifting public/private mix of retirement income, the declining replacement rates of public benefits, and reforms for targeting benefits by age. An analysis of these trends suggests that (a) social security will provide declining economic support for those most in need; (b) middle- and upper-income groups will have a diminished stake in social security, reducing the programme's political base of support; (c) increasing reliance on occupational pensions will heighten the need for greater public regulation of private schemes; (d) an unplanned two-tiered system of pensions will emerge, with the first tier consisting of a whittled-down version of social security to provide a predominant source of retirement income for low-income wage earners and the second tier consisting of private pensions for middle- and upper-income groups.     

Health Care in Asia and the Pacific: Increasing the focus on social health insurance

This paper focuses on health insurance reform within the broader frameworks of both social security and health services system development. In most countries in Asia and the Pacific, it is indeed the reform of the health services system, through policy changes in health care financing, that has led to an increased focus on health insurance. The underlying issue in this reform is the shift in responsibility that has taken place in most countries in the region over recent years. In the past, governments were responsible for financing health care for their populations. This shifted to defining, legislating and implementing an appropriate health care financing mechanism, presenting several challenges: to reach universal health insurance coverage through new initiatives for new populations, mainly the informal sector accounting for the majority of the population in almost all these countries; to apply provider payment systems that enable control over costs and the volume of utilization; and to strengthen primary health care as a foundation for rational utilization and more resources for prevention, including prevention of chronic diseases among the ageing population. This approach will require an active partnership between health insurance schemes and government that should reflect the new division of responsibilities to guarantee access to high-quality health care for all.     

Reforming formal social security systems in India and Sri Lanka

This paper analyses the formal social security systems of India and Sri Lanka. While many of the social, demographic, and economic indicators differ markedly between the countries, the structure of the social security systems, challenges, and reform directions are quite similar. Thus, the provident fund organizations in both countries need to modernize and benchmark their governance, operations, and investment policies. The dualism in their systems, which has resulted in relatively generous non–contributory pensions being provided to civil servants, also needs to be addressed. This dualism and the fiscal unsustainability of current civil service pension arrangements lend urgency to reforms in this area in the two countries. The prospects for voluntary tax–advantaged private sector schemes are encouraging, particularly in India. The conditions for reforms are more favourable now owing to hopeful signs of an end to longstanding conflict in Sri Lanka, and decade–long experience with financial sector reforms in India.