Almost half the world’s older persons lack pensions

ILO report says 52 per cent of older persons receive a pension, but levels are inadequate and the trend has been worsened by fiscal consolidation.

GENEVA (ILO News) — Nearly half – 48 per cent – of all people over pensionable age in the world do not receive a pension, and for many of the 52 per cent who do coverage is not adequate, says a new report by the International Labour Organization (ILO).

As a result, the majority of the world’s older women and men have no income security, have no right to retire and must keep working as long as they can – often in poorly paid, precarious conditions.

The ILO policy paper “Social Protection for older persons: Key policy trends and statistics” shows that in recent years many middle and low-income countries have been rapidly expanding pension coverage through a mix of contributory and non-contributory, tax-financed social pensions.

The report looks at pension systems in 178 countries. It finds that more than 45 countries have reached 90 per cent pension coverage and more than 20 developing countries have achieved or nearly achieved universal pension coverage.

“Many developing countries are boldly expanding their pension systems — a very positive trend,” said Isabel Ortiz, director of the ILO’s Social Protection Department. “But as important as expanding coverage, is guaranteeing adequate pension benefits. Older men and women have a right to retire in dignity, without falling into poverty. This is an issue worldwide.”

How well do countries cover their populations for pensions?

Remarkable increases in pension coverage were achieved in only a decade in places like China, Lesotho, Thailand, Timor Leste and Tunisia, ranging from about 25 per cent to more than 70 per cent of the population. Tax-financed pensions play a major role in extending pension coverage, as they ensure a basic level of protection for those not receiving a contributory pension.

Austerity’s effects

According to the report, fiscal consolidation policies adopted from 2010 onwards have led to reduced social protection for older persons. Adjustment measures include cuts in health and other social services, as well as pension reforms such as raising the retirement age, reducing benefits and increasing contribution rates.

“These adjustments are undermining the adequacy of pension and welfare systems and reducing their ability to prevent poverty in old age,” said Ortiz.

“The long-term liabilities of austerity take time to show up. Depressed household income levels are leading to lower domestic consumption and slowing down economic recovery. It is alarming that future pensioners will receive lower pensions in at least 14 European countries by 2050,” she added.

Social protection as growth strategy

Ortiz explained that the positive impacts of social protection on both social and economic development, for example through boosting consumer spending and promoting more inclusive economic growth, have put social protection at the forefront of the development agenda. Many middle-income countries are enlarging social protection as part of their strategy to drive economic growth.

Public social security systems with strong social protection floors are essential for economic recovery.”
Isabel Ortiz – ILO “China, for example, has achieved nearly universal coverage of pensions and increased wages,” Ortiz said.

Some countries, including Argentina, Bolivia, Chile, Hungary, Kazakhstan and Poland, are reversing the earlier privatization of their pension systems of the 1980s and 1990s because they were too expensive and did not expand pension coverage. The full or partial renationalization of these pension schemes aims to reduce the fiscal costs, to improve pension coverage and old-age income security.

“Public social security systems with strong social protection floors are essential for economic recovery, inclusive development and social justice, and therefore must be an integral part of the post-2015 development agenda,” said Ortiz. “Social protection in old age is a human right backed by international labour standards. It also makes good economic sense.”

The ILO promotes policies and provides assistance to its member states to help extend adequate levels of social protection to all members of society, including older persons.

The ILO Social Protection Floors Recommendation, 2012 (No. 202), which calls for the extension of social protection coverage, following the principles of universality of coverage, non-discrimination and gender equality, was adopted by 185 countries and further endorsed by G20 leaders and the United Nations.