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Pensions

The Geography in Ageing

Mamta Murthi's picture

A view from Central Europe and the Baltics

A Romanian elderly woman selling flowers Being busy with everyday life many of us, including myself, do not spend much time thinking how our lives will look like in 20 or 30 years. However, when I travel to the countries I work on, I see the challenges faced by the elderly, especially in rural areas.  These challenges include poor access to social and health services, exclusion and simply loneliness.

The countries in Central Europe and the Baltics are ageing.  As a result, the size of the working age population is shrinking, creating labor shortages which could potentially challenge future growth.  Ageing is also putting government budgets under pressure from the rise in age-related spending on pensions and healthcare, and the shrinking base of tax contributors.
   
All of this is well known.  Less appreciated, however, is the fact that in many countries there is a distinct geographical pattern to ageing.  Sparsely populated rural areas are seeing an increasing share of elderly people, while urban areas still attract most of the young generation.   The greying of the rural population creates a challenge for public policy as rural municipalities often have fewer resources with which to address the needs of their elderly population.

Aging: A problem in Africa as well?

Sudharshan Canagarajah's picture

Recently, while reviewing a document, I came across a statistic about age dependency* in the Republic of Mauritius. Mauritius already had an age dependency ratio of 10.9 in 2010 and this is projected to rise to 25 by 2030 and 37 by 2050, which is at par with many East Asian economies. Aging issues in Europe and parts of Asia have already become an economic and fiscal policy concern over the last few years and will remain so for the foreseeable future, could it also become a problem for Sub-Saharan Africa (SSA) sooner than realized?

With 43 percent of the population below the age of 15 and only three percent above the age of 65, Sub-Saharan Africa is a predominantly young continent. The problems emanating from an ageing population, such as rising age dependency ratios and increasing health care costs, are far over the horizon as far as the continent is concerned. However, this may not remain so for long and definitely not for all the countries. Let me explain why.

How Better Protection for the Elderly Could Lower Fertility Rates in Uganda

Rachel K. Sebudde's picture

A typical Ugandan woman gives birth to an average of seven children, far higher than for other countries, including neighboring Kenya and Tanzania. There are many factors that push Ugandan woman to give birth to many children. For instance, low levels of schooling of women in Uganda often result in early marriage and early pregnancy. Inadequate access to family planning services, as well as cultural pressures that reward women for having many children, also contribute to Uganda’s high fertility rates. However, another important reason for Uganda’s high prolificacy is that children are a way of ensuring parents are taken care of after when they retire from active employment and can no longer fend for their livelihood. This incentive is particularly acute due to the fact that the Uganda pension system does not reach the majority of the country’s population. Today, although the elderly are still few in numbers (i.e., less than 5 percent of the population), only 2 percent of them are receiving a pension. Children are therefore perceived as a form of pension to many Ugandans because the majority of the population is not covered by any other system of protection.

Are Second Pillar Pensions Robust in the Face of Economic Shocks?

Mamta Murthi's picture

A view from Central Europe and the Baltics

An elderly Roma woman Saving for old age is important in countries where longevity is increasing. Countries in Central Europe and the Baltics emerged from the economic transition of the 1990s recognizing that they needed to encourage their workforce to retire later and save more in order to be comfortable in old age. To this end, they modified their pay as you go pension systems which collects taxes from workers to pay retirees (the "first pillar") to create an additional or "second pillar" of individual pension accounts funded by taxes. As these second pillar pension accounts were the private property of individual workers, they were expected to encourage saving. Over time as these savings grew, it would be possible to reduce the pensions paid by the government from the first pillar without reducing the standard of living for pensioners who would be able to rely on complementary pensions from their private saving in the second pillar. Typically, a share of payroll tax receipts  was redirected to finance individual pension saving accounts. This resulted in revenue shortfalls in pay as you go you pension schemes, and most governments raised additional debt to meet their obligations which was in turn held by the companies who were managing the pension savings on behalf of employees. However, since the economies were growing rapidly, fiscal deficits were generally kept manageable, easing concerns about additional debt.

Rethinking the household: the impacts of transfers

Markus Goldstein's picture
Two weeks ago, I blogged about some productive impacts of cash transfer programs.   For these effects, as well as the myriad other blog posts and papers on this topic out there, a key point is that the benefits of these transfers extend well beyond the actual individual recipient of the transfer.   
 

Universal Pension, Yes, Regressive Funding, No

David Robalino's picture

Silver miner in Potosi, Bolivia. Photo credit: ©urosrMariano Bosch, Carmen Pages, and Angel Melguizo at the Inter-American Development Bank (IDB) are proposing a new approach to expanding the coverage of pension systems in Latin America while helping create more and better jobs. Their ideas are spelled out in a new book "Better Pensions, Better Jobs: Towards Universal Coverage in Latin America and the Caribbean." The book is about Latin America but the problems discussed and proposed solutions are relevant for any middle-income country. I think the IDB's proposal is a great contribution to the debate on pension reform. Below I discuss some of the points they make that I agree with and those where I think other options could be considered.

It’s Time for Universal Pension Coverage in Latin America

Mariano Bosch's picture

 Local Fisherman in Mexico. Photo: Curt Carnemark / World Bank

The panorama of pension coverage in Latin American and the Caribbean (LAC) is quite worrisome. Fewer than half of the 38 million older workers (aged 65 and older) are receiving a contributory pension — based on contributions (savings) accumulated during their active lives. This means only a small number of the region's elderly in a position to enjoy the two key objectives of pension systems: eliminating poverty in old age and maintaining an adequate standard of living for workers once they stop working.

Social Impact Bonds, Youth Employment, and Pensions

David Robalino's picture

Waiting for salvation — a homeless man in London, 02-22-11 @ Chris Schmidt

People are talking about a relatively new financial instrument — called social impact bonds (SIBs) — that can help governments implement social programs without using taxpayers' monies, that is, unless the programs work.  In fact, the Economist magazine recently had an article about SIBs. These bonds were introduced by the British in 2010. New York City, working with Goldman Sachs, launched a SIB last year. The White House is exploring SIBs to finance some Department of Labor programs.  And emerging markets, with the help of international development agencies, are also showing an interest. 

Investing in Jobs to Pay for Pensions

David Robalino's picture

Elderly couple watches a child. Belgrade, Serbia. Photo: I. Djokovic/World Bank

We've all heard about the problems that pay-as-you-go pension (PAYG) systems have delivering on their promises. These are the most common public pension systems around the world and many are going bust — largely because as populations age, there are fewer workers making contributions to pay for the pensions of an increasing number of retirees. Well, now we know how to fix them...

Why should governments care about improving their payment programs?

Massimo Cirasino's picture

In Portuguese

In Spanish

Regardless of a country’s stage of economic development, their governments make payments to, and collect payments from individuals and businesses. Financial resources are also transferred between government agencies. These flows cover a wide range of economic sectors and activities, and in most cases, the overall amount of such flows is significant – normally ranging between 15% to about 45% of the GDP.Pensioners can benefit from safer, efficient and more transparent payment programs. (Credit: World Bank)

However, only 25% of low-income countries worldwide process cash transfers and social benefits electronically and this percentage is only slightly higher for public sector salaries and pensions—and this has considerable cost implications. By going electronic, governments can save up to 75% on costs, a significant amount in an era of stretched resources.


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