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Pensions

Connecting pension funds with emerging market infrastructure

Joaquim Levy's picture

It might sound improbable to hear a CFO say this, but I consider one of my roles since joining the World Bank Group to be that of matchmaker. Let me explain.

As I have noted in other blogs over recent months, the world’s emerging market and developing economies—EMDEs for short—face an enormous gap in infrastructure investment. Certainly it is not the only big financing challenge that countries face as they work to reduce poverty and extend prosperity to more of their citizens. But infrastructure underpins many aspects of economic growth, getting people to jobs and schools, connecting goods to markets, reducing the isolation of the poorest areas in many countries.  And by some estimates, the sector’s funding gap is as high as a trillion dollars. 

Can developing countries increase pension coverage to prepare for old age?

Gloria M. Grandolini's picture
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While many of us work hard to postpone growing old, ageing populations as a whole are inevitable, predictable and something countries can prepare for.

As developing countries prosper, their citizens will live longer and, hopefully, healthier lives. By 2050, the number of people in the world 65 and older will have doubled from 10% to 20%. By then 80% of the world’s elderly –nearly 1.3 billion people - will live in low-income countries.
 
Are these countries set up to care for these forthcoming senior citizens and ensure they have the resources to live in dignity in old age? Will countries be able to ensure fairness between the generations and resources?
 
Current pensions systems leave many pockets of society uncovered:
  • As countries become more urbanized and families have fewer children, traditional family-based care for the elderly is breaking down, without adequate formal mechanisms to replace it.   
  • Traditional employment-based pensions systems don’t cover most informal sector workers in developing economies. In some regions, these workers account for two-thirds or more of the working age population. Even for those with formal sector jobs, pension coverage has been declining for people who’ve entered the workforce since 1990 in terms of years contributed over lifetime, according to World Bank Pensions Database. This has a major impact on the amount of retirement income they will eligible to receive.