Systems providing financial security for the elderly are under increasing strain throughout the world. In many countries, populations are ageing rapidly due to rising life expectancy and declining fertility rates.
Photo: Steve Ryan
This adds to difficulties encountered by extended families and other traditional ways of supporting the elderly which are already weakening under the pressure of urbanization, globalization, and increased mobility. At the same time, public systems of old-age security are themselves in need of reform. Many existing systems are very costly even though they provide inadequate protection for the elderly.
The old-age benefit in most countries is a wage-related, periodic payment. However, some countries pay a universal fixed amount that bears no relationship to prior earnings; others supplement their universal pension with an earnings-related pension. Provident fund systems make a lump-sum payment, usually a refund of employer and employee contributions plus accrued interest.
Social protection programmes that include provision for old-age benefits usually include provision for survivors’ benefits as well. These benefits are generally a percentage of either the benefit paid to the deceased at death or the benefit to which the insured would have been entitled if he or she had attained pensionable age or become disabled at that time. In most cases, the provision of survivors’ benefits is confined to widows/widowers who are caring for young children, are above a specified age, or are disabled. Many systems also pay benefits to other surviving close relatives, such as parents and grandparents, but only in the absence of qualifying widows, widowers, or children.
During the last two to three decades, public pensions have attracted unprecedented attention. A vast literature has been created that discusses the alleged advantages, disadvantages and failures of alternative systems of organizing the provision of public pensions. In many industrialized countries that are faced with major challenges related to population ageing, the main trend is reflected in the promotion of pluralistic systems that diversify retirement income sources to reduce risk and have a redistributive function aimed at alleviating poverty in old age. There is also more and more interest in investigating the particular case of pensions for women having worked for shorter time periods and earned lower salaries, and in pushing for strategies to increase the participation rates of older workers. For developing countries with low coverage and high proportions of their workers in the informal sector, priority is being given to expanding coverage. This is a difficult task, mainly because of the problems of bringing informal workers within the ambit of formal social security programmes.
The International Social Security Association, as the worldwide centre for the collection and dissemination of information on social security developments and good practice, aims to continuously serve as an international forum for exchanges on relevant experiences in extending pension coverage and making pension systems more sustainable throughout the world.