Social security reforms in Kenya: Towards a workerist or a citizenship‐based system?

With social security provisions in Kenya remaining under‐reported in the more recent literature, this overview covers recent reforms in key areas of the country's social security system. In the health sector and in old‐age pension provision social security is still mainly workerist (biased toward those in formal employment), and attempts to expand coverage have had limited effect only – cash transfer programmes, for instance, have been expanded but in practice they do not universally cover the entitled categories. Thus, although the Kenyan social security system now has a considerable pro‐poor social assistance component it remains biased toward those in formal employment, to the benefit of the highest income quintile.     

Three Routes to Pension Reform: Politics and Institutions in Reforming Pensions in Denmark,Finland and Sweden

By analysing pension reforms in three Nordic countries – Denmark, Finland and Sweden – that apply different institutional solutions in their old‐age security programmes, this article argues that the political processes that shaped the country‐specific pension set‐ups in the 1950s and 1960s had important ramifications for subsequent reform possibilities. A high degree of inertia exists not only in the institutions themselves but also in the political reform options and the ways in which pensions were reformed. The analysis shows that the ‘new politics’ was not new in any of the three countries. Furthermore, given the differences in the three cases, the analysis questions the nature of pension reform. The Swedish reform in the late 1990s was a ‘big bang’ that eliminated the old and changed everything; the Finns built on piecemeal reforms of conversion that gradually changed the whole system; and, while the Danish story appears to be one of stability and status quo, the drift of Danish policy ultimately changed the basic characteristics of the system. Although all three countries have more or less thoroughly reformed their pensions, the reform processes have differed according to both historical legacies and institutional frameworks.     

The Impact of Neo-liberalism on South Korea's Public Pension: A Political Economy of Pension Reform

This article examines the recent Korean pension reforms from a political economy perspective. It argues that these reforms are of particular interest because, unlike major pay-as-you-go pension schemes in Europe, the Korean pension scheme is a funded one and, therefore, is subject to market exposure. Also in contrast to the problems that public pension reforms have encountered in European and other OECD countries, especially 'blame avoidance', the more radical Korean reforms were implemented without significant challenge or resistance. First of all, the National Pension Scheme is described prior to the 1997 Asian economic crisis. Then the impact of this crisis on the Korean welfare state and, especially, its pension system are analysed. The main part of the article consists of a political economy of the pension reform process, in which the key roles of the international governmental organizations and the domestic neo-liberal policy elite are pinpointed. This neo-liberal ideology was critical in developing and sustaining an influential discourse on the 'crisis' in Korea's national pension fund. The article concludes by arguing, against the neo-liberal tide, for the inclusion of a pay-as-you-go element in the national pension in order to tackle escalating poverty in old age.     

Public pension institutions and old‐age mortality in a comparative perspective

Norström T, Palme J. Public pension institutions and old‐age mortality in a comparative perspective Int J Soc Welfare 2010: ??: ??–??© 2010 The Author(s), Journal compilation © 2010 Blackwell Publishing Ltd and International Journal of Social Welfare. The aim of the study was to estimate the impact of changes in pension rights on old‐age mortality. We made a distinction between two dimensions of pension benefits, one of providing basic security (BASIC), and the other of providing income security (INCOME). Analyses were based on data for 18 OECD countries during the post‐war period. The outcome comprised old‐age excess mortality, defined as the ratio of the mortality rate 65+ to the mortality rate in the age group 30–59 years. The latter was regarded as a proxy for unobserved factors potentially related to old‐age mortality as well as pension rights. The pooled cross‐sectional time series data were analysed through fixed effects modelling. The results suggest that BASIC (but not INCOME) has a beneficial impact on old‐age excess mortality, which was statistically significant. We interpret the results in terms of the poverty‐reducing effects of pension entitlements with a basic security orientation.     

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 development and Reform of Social Security Pensions:The Approach of the International Labour Office

The reform and the development of pension schemes are affected by the values society places on the provision of income security in old age and the resources it is prepared to allocate for the purpose. This paper examines those values and the issues arising from them. The objective is to propose reforms which will simultaneously provide full coverage with good governance, prevent poverty in old age, and result in indexed, guaranteed and reliable pensions for those onaverage incomes, all with minimum economic distortion or adverse economic effects. The question of the most appropriate design has to be weighed against these other factors, which will determine not only what is feasible and what is not, but also where the most desirable balance lies. The optimum structure would seem to involve a mix of defined benefit and defined contribution schemes.     

Changing the Financing of the Lithuanian Pensions System

After the first pension reform in Lithuania, in 1995, the reforming process must continue. Important changes are needed, based on principles of old age security financing. A three-tier system has been drafted and approved by the government as a Concept of the reform. The main change proposed as a first tier is the introduction of a national pension based on the residence principle, instead of the existing basic pension based on the insurance principle. It is expected that in this way the problem will be solved of providing protection against poverty for the increasing number of people who do not have the necessary insurance record. The second tier should be a compulsory funded system based on privately managed pension funds. Several important goals would thus be achieved: diversifying the old age security risk between pay-as-you-go and funded schemes; boosting investment opportunities and encouraging financial markets to develop; offering improved incentives for the working population to contribute; and so on. The main obstacle to the introduction of the second tier is the high transition cost. The third tier would comprise voluntary pension funds: their activities should be liberated and the severe constraints on investment return removed.     

Left to Market and Family – Again? Ideas and the Development of the Rural Pension Policy in China

The rural pension policy in China is characterized by a high degree of instability. In the past 15 years since the introduction of pilot schemes in some regions, the state has been unable to establish a stable institutional framework for rural old‐age security. This article seeks to integrate the theoretical insights from a growing body of international literature on the role of ideas in social policy reform in order to shed new light on the study of Chinese rural pension policy. I argue that the rise of the rural pension scheme and its eventual failure to make consistent progress towards a comprehensive system is directly related to conflicting ideas among bureaucrats with respect to what sort of welfare provision the rural elderly actually need. The fluctuations in this policy realm vividly illustrate the predominance of the policy idea that peasants could still rely on their land and family, supplemented by private commercial insurance, in their old age. Given this alleged self‐reliance on the part of rural residents, the state is very reluctant to set up a comprehensive rural pension scheme. As a result, the old‐age security of the peasants in rural China is standing on very thin ice, and the prospect for more active state involvement in the near future remains dim.     

Old–age security in Bhutan: From lump–sum payments towards a pension scheme

At present, Bhutan's old–age security still is mostly based on an extended family network. Formal old–age provision is mainly for civil servants, providing, however, only lump–sum payments. This paper analyses the present conditions and obvious deficits of the existing arrangements and outlines possibilities for introducing a pension scheme which provides regular (monetary) income in old age. Income in old age could be increased and costs could be reduced by transforming the existing provident fund totally or partly into a pension scheme. This can be combined with pay–as–you–go and funded elements.     

A comparative analysis of pension reforms and challenges in Ghana and Nigeria

Ghana and Nigeria recently joined a number of countries that have incorporated fully‐funded defined contribution pension programmes into their national social security arrangements. Contemporary analyses of pension reforms, however, continue to focus on middle‐income countries in Latin America and Central and Eastern Europe, as well as on Member States of the Organisation for Economic Co‐operation and Development, thereby marginalizing recent pension policy reforms in sub‐Saharan African countries. This article examines the complete and partial shifts to defined contribution pension programmes in Nigeria and Ghana respectively, and points to a number of contextual and contingency factors that challenge the use of defined contribution schemes as a means to address problems of benefit adequacy in the sub‐Saharan African context.     

Old Age Pensions in South Africa

This article briefly describes the old age pension system in South Africa, with a special focus on its strengths and the challenges it faces. The article shows that the most pertinent concerns are the level of exclusion from the contributory pension funds, the extent of reliance on the social assistance programme and the lack of institutional capacity to deliver the social assistance programme effectively. The proposed reforms are aimed at achieving a better integrated pension system where contributions are mandatory for all formal sector workers and where contributions are preserved for retirement. The underlying objectives are to limit the growing dependence on social assistance from the State, and at the same time to increase the effectiveness of the social assistance scheme for the target population.     

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.     

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.     

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 ABCs of nonfinancial defined contribution (NDC) schemes

Nonfinancial defined contribution (NDC) pension schemes have been successfully implemented since the mid‐1990s in a number of European countries such as Italy, Latvia, Norway, Poland and Sweden. The NDC approach features the lifelong contribution–benefit link of a financial defined contribution (FDC) personal account scheme, but is based on the pay‐as‐you‐go (PAYG) format. At its start out, the PAYG commitments of the preceding defined benefit (DB) system are converted into individual personal accounts, allowing for a smooth transition from the DB to the DC format, while avoiding the very high transition costs inherent in a move from a traditional PAYG DB scheme to a fully funded FDC scheme. The NDC approach implemented by the rule book is able to manage the economic and demographic risks inherent to a pension scheme and, by design, creates financial sustainability. As in any pension scheme, the linchpin between financial stability and adequacy is the retirement age; in the NDC approach the individual retirement age above the minimum age is by design self‐selected and by incentives should increase the effective retirement age in line with population ageing. As a systemic reform approach NDC has become a strong competitor to piecemeal parametric reforms of traditional nonfinancial DB (NDB) schemes. While frequent, these reforms are far from transparent and usually too timid and too late to create financial sustainability while providing adequate pensions for the average contributor. This article offers a largely non‐technical introduction to NDC schemes, their basic elements and advantages over NDB schemes, the key technical frontiers of the approach, and the experiences of NDC countries.     

The macroeconomic impact of reforming a PAYG system: The Portuguese case

Abstract   The article analyses the impact of various types of reform options on social security pension system financial sustainability and on a range of macroeconomic variables. The HERPOR model is used to consider the likely effects of parametric reforms of the existing pay-as-you-go system, as well as those of a systemic reform. The article concludes that the former are sufficient to ensure financial sustainability, although they should be accompanied by employment implementation measures. The article concludes that a fully pre-funded system does not seem to be a viable option for policy-makers in the redesigning of social security pension systems, due to the high transition costs involved.     

Old‐age protection for women in the Spanish pension system

The example of Spain confirms the common view that contributory pension systems reproduce inequalities between the sexes that result from the nature of labour market structures and the sharing of family responsibilities. In general, women who stay at home are not entitled to their own pensions and are dependent on benefits of lower value such as survivors' pensions (derived entitlements) or non‐contributory pensions. In turn, women who work outside the home accrue lower entitlements than men and, consequently, lower old‐age or disability pensions (personal entitlements). The purpose of this article is to examine the figures for pension distribution by sex in Spain, review some of the pension policies that have been implemented since 2000, and propose direct action for progress in the transition from derived entitlements to personal entitlements. These proposals are designed to promote sex equality, defined as the right to equal well‐being and financial security in old age.     

"Risk" and UK Pension Reform

“Risk” is a word that has become common currency in the financial services industry in general, and in the pensions industry in particular. This article critically examines its use in the context of the current debate about UK pension reform. “Risk” is used by a broad spectrum of interests to discuss a wide range of pension issues in a variety of contexts. The article outlines key theoretical perspectives on the nature and construction, or conceptualization, of risk. Their relevance to debate and policy initiatives, particularly public pension policy, is examined. It is suggested that current government policy is failing to carry with it those to whom the policy applies; that reforms implicitly, if not explicitly, underestimate the importance of “security”; and that failure to conduct a much broader debate about the fundamental notions of work, retirement, saving and security may simply condemn the UK to interminable pension reform.     

Promoting a higher retirement age: A prospect‐theoretical approach

Demographic ageing and the necessity of raising the retirement age is one of the most frequently debated topics among European welfare policy experts. This study used prospect theory as developed in behavioural economics to explain public attitudes towards pension reforms. It argues that, in line with prospect theory, negative incentives are more useful in changing people's attitudes in favour of a higher statutory retirement age than are positive incentives. Therefore, in the case of increasing life expectancy, defined‐contribution schemes that apply actuarial formulae linking the level of starting monthly pension benefits to life expectancy are more useful in promoting a higher retirement age than conventional defined‐benefit schemes, which typically do not forge an automatic connection between longevity and starting pensions. The implications of prospect theory for attitudes towards pension reforms were tested using Eurobarometer survey data collected in 2004 and 2009 in the Czech Republic, Poland and Slovakia.     

Effects of sharing the parental leave on pensioners’ poverty and gender inequality in old age: A simulation in IFSIM

Female old age poverty is affected by family policy reforms which are meant to promote gender equality when young. Using our in house agent based simulation model IFSIM we show that sharing equally the parental leave can increase or reduce poverty among elderly women depending on the macro and behavioural (i.e. labour supply) responses that the reform off-sets. In general, the reform can be good for highly educated women, who will have an incentive to work more full time thanks to their higher earnings, which can compensate any loss in household income due to the man's staying home. For lower educated however, work might not pay as much and a reduction in labour supply might actually ensue (e.g. to reduce childcare costs). This will reduce also their pension rights at retirement. Furthermore, keeping men at home might slow down economic growth, and consequently growth of income pension accounts will be lower. This effect, combined with lower pension contributions (due to reduced labour supply), might result in higher poverty rates for women with lower education, compared to a scenario where the woman takes the whole leave. Other policies, such as more subsidised child care, might be an alternative worth considering to reduce female poverty in old age more evenly across educational levels.