Extending pension coverage in Cambodia: The governance and investment challenges of the Social Security Investment Fund

Rapid economic growth, declining fertility and changes in family structures have encouraged the Kingdom of Cambodia to reform its old-age pension system. The Government of Cambodia reached an important milestone in 2019, when the Law on Social Security was promulgated. The Law includes provisions for a compulsory defined benefit pension scheme, establishing a sound framework for extending compulsory pension coverage beyond the public sector to formal private-sector workers. As a future step, the compulsory pension scheme should be extended to informal workers. To accompany the reform, the investment policy for the pension scheme’s reserve funds, including the supervisory regime and investment strategy, will be essential for the modernization of the Cambodian social security system. In this regard, Cambodia has successfully sought policy advice. However, the country should continue to seek further advice, and to act on this. Otherwise, the necessary and increasingly pressing policy ambitions of Cambodia to develop an adequate and sustainable social protection system may not be fully realized.     

Curbing the demographic “drifting dune” in long-term care insurance financing: The case of Germany

Long-term care provision and financing are becoming increasingly important matters in all ageing economies. Therefore, a major challenge for policy makers is to strike a balance between adequate care and sustainable financing. In this study, we evaluate the proposal of a so-called sustainability factor in German long-term care insurance. Considering changes in the beneficiary-contributor ratio, it aims for a rule-based consideration of demographic dynamics to alleviate pressure on long-term care financing. Using the framework of generational accounting, we demonstrate that this proposal could have a relieving effect on finances, depending on the share of involvement of current and future generations. It may offer an option for pay-as-you-go long-term care insurance systems worldwide that need to curb the impact of ageing societies. Therefore, this article addresses policy makers tasked with designing a sustainable financing model for long-term care insurance. It demonstrates that the sustainability factor represents a step towards sustainable finances and, thus, it might be one component of a more comprehensive reform package.     

Pension financialization and collective risk sharing in Canada and Finland

This article contributes to the debate concerning pension financialization and how countries are adapting their pension systems to respond to demographic ageing. We do so by examining the statutory pension systems of Canada and Finland, which diverge interestingly from current international trends. The Canadian and Finnish public pension schemes reflect two tendencies often associated with pension financialization: an increasing reliance on financial markets and an investment policy with a diversified asset allocation. However, unlike in many other countries, this has not resulted in heightened individual risks in old-age income security caused by a shift from defined benefit to defined contribution pensions – an otherwise common trend internationally.     

Social security coverage for couriers who work through digital platforms in Mexico: A role for a special scheme?

The socio-demographic characteristics of couriers who work through digital platforms in Mexico reveal that more than 85 per cent of these workers have completed full-time secondary education and 83 per cent of these workers are young (aged 14 to 44). However, only 25 per cent are covered for health services and social security benefits. Against this backdrop, and guided by international experience, we set out a proposal to provide these workers with a tailored package of social security benefits. The proposal would require to categorize couriers who work through digital platforms as “digital workers”, introduce a special scheme for these workers based on voluntary affiliation, and offer a specific portfolio of benefits.     

The expected impact of the 2019 Brazilian pension reform on survivors’ pensions

This study analyses the expected changes in survivors’ pensions resulting from the permanent rules of the 2019 pension reform in Brazil. Actuarial annuities are used for representative worker profiles. The dispersion in the replacement rate values decreases, except for the highest income level. The rates needed to finance survivors’ pensions decrease relatively more than do the rates for old-age pensions. The internal rates of return significantly decrease. There is a heterogeneous change in the distributive aspects of the pension system. The reform shall affect the adequacy and intragenerational equity of old-age and survivors’ pensions.     

The Brazilian pension model: The pending agenda

To achieve national goals defined by the 1988 Brazilian Federal Constitution, cash benefits alone are insufficient in the absence of more robust social services to reduce inequalities and improve social cohesion. The Constitution, albeit of national importance and international significance, has not addressed many institutional and administrative weaknesses in the design of the national pension system. Although coverage has been increased and inequality reduced, these measures are not sufficient. Brazil's ambitions to further develop social policies (and, indeed, to live up to its accorded international status as a social policy leader) may be constrained by an over‐reliance on conditional cash transfers such as those provided under the Bolsa Família programme. Brazil faces a major political‐economy challenge in addressing all these issues because the policy reform process is difficult, and, more importantly, because of the embedded role of vested interests. Moreover, Brazil must tackle these issues in the face of growing fiscal pressures, which could weaken the current political legitimacy of social policy and undermine important recent successes.     

The risk of under-insurance in the Finnish statutory pension scheme for self-employed workers: A trajectory analysis

Using unique data on the contribution base, we investigate under-insurance within the statutory pension scheme for self-employed workers in Finland. Under-insurance is defined as the difference between pension-declared income and tax-declared income. The trajectory modelling technique applied has allowed us to estimate the levels of under-insurance for different subgroups and to identify possible explanatory factors. Under-insurance is found to be persistent and large. The analysis reveals six distinctive and homogenous sub-groups of self-employed workers. Close to 84 per cent of these workers pay too little in contributions, often leading to inadequate protection against personal risks. Especially for lower-income self-employed workers, this points to myopic behaviour as regards contributing to the self-employed statutory pension scheme and calls for fine-tuned economic incentives.     

Improving the protection of migrant workers with work histories in the European Union and Ibero-America: Enhancing the coordination of international social security instruments

Migration affects almost every nation, emphasizing the need to guarantee social security rights for all migrants and their families. This article focuses on the rights of workers who migrate between the countries of the European Union (EU) and the Ibero-American community. In the EU, social security systems are increasingly coordinated through Regulation No. 883/2004 and its Implementing Regulation No. 987/2009. In the Ibero-American community, coordination is sought through the Ibero-American Social Security Convention. Despite convergence between these two international instruments, coordination is still lacking between them. This article presents a comparative analysis to articulate the necessary mechanisms to guarantee coordination, to respect the social security rights of migrant workers. We focus on the cooperation and coordination between regional as well as national systems, specifically looking at the need for and aims of a rapprochement between these two major international coordination instruments to provide greater EU-Ibero-American cooperation. Finally, the importance of promoting greater international cooperation in social security policy and administration is highlighted, to engender the adequate protection of the rights as well as the free movement of migrant workers.     

Special pension schemes for workers in arduous and hazardous jobs: Functions and conditions to ensure equal treatment

Most jurisdictions grant differentiated and more beneficial treatment – usually in the form of early retirement, and commonly under special pension schemes – to workers in arduous or hazardous jobs. Several justifications for such treatment have been advanced, including i) compensating the worker for the hardship, ii) protecting the worker from the hazard, and iii) realizing the principle of equality in the distribution of costs and benefits in the social security system. This article analyses these functions from a socioeconomic perspective and explains how early retirement for workers in arduous and hazardous jobs is necessary to ensure equality by treating “unequals unequally”, and in proportion to their inequality. Moreover, this article presents a precise formula to calculate when a worker should be allowed to retire, so that workers in occupational domains with a shorter life expectancy do not systematically enjoy lower expected benefits from the pension system while having contributed the same amount. Implications for the design and desirability of special pension benefits are discussed.     

The impact of international migration on the public pension system: The case of Portugal

This article analyses the impact of replacement migration on the financial sustainability of the old‐age pension system in Portugal, a country with one of the largest ageing populations in Europe. We do this using demographic forecasts and prospective exercises for the evolution of the Portuguese economy. During the 2015–2060 period, our results evidence the positive impacts of international migration on old‐age pension system financial balances, reaching over 3 per cent of GDP after 2045. Moreover, even when taking into considering the low dynamics for the Portuguese economy, replacement migration is an important input to improve pension system financial sustainability.     

Health care privatization processes in Europe: Theoretical justifications and empirical classification

This article analyses the health care system reform process in Europe based on the concept of privatization. This notion is understood from two perspectives. First, privatization may concern the health care financing or the provision of health services. Second, privatization can be “imposed” on individuals or be “internalized” and then introduced by individuals (patients and doctors). So we emphasize the diversity that privatization can assume. We classify privatization mechanisms used by different countries and identify which of the perspectives presented are more common in 14 European Union countries since the 1980s. The article shows that even if privatization processes are widespread, they assume different patterns in each country.     

The cross-border portability of social security benefits: Status and progress?

The importance of the cross-border portability of social benefits is increasing in parallel with the rise in the absolute number of international migrants and their share of the world population, and perhaps more importantly with the much higher and rising share of the world population that for some part of their life is working and/or retiring abroad. This article estimates how the rising stock of migrants is distributed over four key portability regimes ranging from portability through bilateral social security arrangements to undocumented workers with no access to any scheme. The comparison of estimates for 2000 and 2013 indicate a modest but noticeable increase in the share of migrants under regime I (full portability) by 1.4 per cent, but the biggest change occurred under regime III (no access to social security but also no contributions required), which almost doubled to 9.4 per cent. Regime II (potential exportability without totalization) reduced by 3.0 percentage points but remains the dominant scheme (at 53.2 per cent). The estimates suggest that the scope of regime IV (informality) reduced by 2.9 percentage points, accounting for 14.0 per cent of all migrants in 2013. This trend is positive, but more will need to be done to progress on benefit portability and various potential solutions lie outside bilateral agreements that are difficult to establish.     

China’s social security response to COVID-19: Wider lessons learnt for social security’s contribution to social cohesion and inclusive economic development

China has adopted an array of special social security measures in response to the spread of the COVID-19 virus, to mitigate the downside social and economic impacts caused by the pandemic. Measures include the reduction, exemption and deferral of social security contributions by employers, the extension of benefits coverage for employees, and the provision of more accessible e-services by social insurance agencies. The article points out that a preliminary assessment of those measures would suggest that they have played a key role in supporting social cohesion and in stabilizing the economy. In a critical manner, the article compares the measures adopted in China with those of other countries, and identifies how China could learn from international practice and experience. Finally, and based on recent Chinese experience, the article presents proposals that seek to improve the longer-term contribution made by the Chinese social security system to realize the goals of social cohesion and inclusive economic development. As set out in China’s Social Insurance Law of 2010, the social security system should not only support a fair sharing of benefits of development, but also promote social harmony and stability.     

Second‐pillar pensions in Central and Eastern Europe: Payment constraints and exit options

During 1998–2007, a majority of Central and Eastern European (CEE) governments enacted laws obligating workers to save for retirement in privately managed individual accounts. The governments funded these accounts with a portion of public pension revenues, thus creating or increasing deficits in public systems. After the onset of the global financial and economic crisis (2008), most CEE governments reduced these funding diversions and scaled back the accounts. Now, a decade after the crisis, this article examines the benefits that the accounts are beginning to pay retiring workers. In general, these benefits are shown to be disadvantageous compared with public pensions. Some pay lump sums in lieu of regular monthly benefits, most fail to adjust pensions regularly for inflation, and some pay women less than men with equal account balances. In several countries, pensioners with individual accounts receive lower benefits than those without them. To enable retiring workers to avoid these disadvantages, several CEE governments have allowed them to refund their account balances and receive full public pensions. Yet while this strategy diffuses worker dissatisfaction, it also places strains on public pension finance. To assist second‐pillar account holders without weakening public pensions, governments should consider making private pension savings voluntary and financing these schemes independently of public pensions – i.e. by worker and employer contributions and, possibly, direct state support.     

Pension reforms in EU11 countries: An evaluation of post‐socialist pension policies

This article evaluates the pension policy pathways of the 11 former state socialist nations that have joined the European Union since 2004. Focusing primarily on the post‐2004 period, the analysis discusses the most important measurable outcomes of these countries’ pension reforms, in terms of poverty alleviation, pension adequacy and fiscal sustainability. Going beyond the quantifiable concepts, we also investigate the quality of the 11 countries’ pension systems in terms of equity as well as efficiency, emphasizing the less conspicuous design errors present in these systems. Although these errors have received little attention to date, they may harm pension schemes along several dimensions, including their fiscal sustainability.     

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.     

The role of mutuals and community-based insurance in social health protection systems: International experience on delegated functions

The institutional architecture for the provision of social health protection varies across countries, as do the actors and organizations involved. In some countries, mutual benefit societies and community-based health insurance organizations (CBHI) play a role in this area. In the 1990s, these were promoted particularly as a means of extending social security coverage, especially in sub-Saharan Africa. In the current context, the adoption of the 2030 Agenda for sustainable development, as well as renewed political will to realize universal coverage, has led to a questioning of the role of mutuals/CBHI. However, the literature on the roles they play in national social security systems remains limited. For this scoping review, 49 documents were analysed, covering 18 countries worldwide, focused on the delegation of functions to mutuals/CBHI in national social health protection systems. The results reveal the dynamics of the delegation of functions within social protection systems over time and their implementation processes. These provide areas for reflection that can inform policy processes.     

The evolution of the Georgian social protection system since independence: An unclear future despite recent expansion

In the first decade of transition, the Georgian social protection system experienced a major retrenchment as the government struggled to finance welfare provision in the face of massive economic contraction and the near collapse of public institutions. Since 2004, this trend has been reversed, with the economy returning to a fast growth path and public administration improving considerably. Recent reforms, including the notable introduction of universal public health insurance, are welcome steps towards building a modern welfare state. Major challenges still remain, however, especially in relation to the system's limited effect on widespread poverty. Decelerating growth, the lack of strong pro‐welfare actors, and the absence of positive external pull factors may stall or prevent future growth, but the changing nature of the social contract between the people and government, as well as Georgian politicians' growing recognition of the importance of the welfare system for inclusive growth, leaves ample space for optimism.     

The effects on intra‐generational inequality of introducing a funded pension scheme: A microsimulation analysis for Estonia

This article uses a single male cohort microsimulation model to analyse the intra‐generational and distributional effects of a shift in Estonia from a defined benefit pay‐as‐you‐go (PAYG) pension system to a multi‐pillared system with a PAYG scheme with contribution‐based insurance components and a funded pension scheme. We contribute to the literature on microsimulation by showing how introducing contribution‐based insurance components and compulsory defined contribution (DC) schemes can increase pension inequality. Our results show that in the case of a high level of inequality in labour earnings and high long‐term unemployment rates, such as in Estonia, the introduction of a very strong link between contributions and future benefits leads to considerably higher inequality in pension incomes as measured by the Gini coefficient. Simulation results for Estonia suggest that inequality in old‐age pension incomes more than doubles when the reforms mature. In contrast, the inequality in replacement rates decreases.     

Reinvigorating the social contract and strengthening social cohesion: Social protection responses to COVID-19

The COVID-19 pandemic has exposed the vulnerability of those who are inadequately covered by social protection in more and less developed countries alike, and has exacerbated the fragility of a social contract that was already under strain in many countries. A weak social contract in the context of an exceptional crisis poses a very real risk to social cohesion. Nevertheless, many States have reasserted themselves as the guarantor of rights by protecting public health and incomes. By sustaining these measures, economic recovery will be supported which will help minimize risks that may weaken social cohesion. However, this is a fast-moving, inherently unstable and protracted crisis. Social protection stands at a critical juncture. Decisive policy action will be required to strengthen social protection systems, including floors, as one of the cornerstones of a reinvigorated social contract.