Social pensions a way to tackle inequality

Cape Town - The rise of social pensions could be a game-changer in improving the wellbeing of older people across the globe.

This is according to the Global AgeWatch Index 2014 launched by HelpAge International, which ranks 96 countries according to the social and economic wellbeing of older people.

The global population is ageing rapidly. Nearly 12% of the world, or 868 million people, are over the age of 60. This number is predicted to rise to 21%, with nearly as many people aged 60 or over as those under 15 – 2.02 billion compared with 2.03 billion.

But economic growth on its own is not sufficient to boost older people’s wellbeing, the index has found. With more than a third of countries trailing significantly behind the best-performing countries, specific policies need to be put in place to address the implications of ageing.

Over the past two decades there has been an explosion of new tax-financed, non-contributory “social pensions”. They now exist in more than 100 countries and have the potential to create a basic regular income for some of the very poorest older people.
 
This seems to be a recent global trend. China, ranked 48th in the index, has introduced a rural social pension in 2009 reaching 133 million more people, equivalent to 16% of the global population of people aged 60 plus. Other countries such as Nepal (70) and Thailand (36) have followed a similar route.  

“Social pensions are a game changer for older people,” said Toby Porter, chief executive of HelpAge International.

“Rising numbers of older people mean governments need to radically re-think their approach to later life”.

The rise of social pensions marks a shift in priorities for pension policy. Contributory pensions in low- and middle-income countries have not met the needs of large proportions of their citizens because most people work in the informal sector, where jobs are precarious and they do not have access to formal pension schemes.

“Incomes are often too low to save for old age, which is why there’s such a need for a basic social pension now,” said Porter.   

Good news is that the cost is much less than often thought. Research in 50 low- and middle-income countries found that the cost of a universal pension for all people over 65 at a level equal to 20% of average income would range from 0.4% of gross domestic product in Burkina Faso to 1.8% in China.

Calculations of future costs found that, despite rapidly ageing populations, most countries could keep costs stable as a percentage of GDP while indexing pension levels to keep pace with the cost of living.

A way to tackle inequality

Social pensions are also helping to tackle inequality and support growth.

“In most European Union countries, pensions systems as a whole do more to reduce inequality than all other parts of the tax or benefit system combined,” said Porter.

They can also contribute to reducing poverty by increasing the amount families have to spend. In low-income countries this can have the same results. In Bolivia, the universal Dignity Pension for everyone from the age of 60 has led to dramatic increases in school enrolment and falls in child labour in households with an older person.

Globally Norway tops the index this year, closely followed by Sweden. Apart from Japan (9), all the top 10 countries are in Western Europe, North America and Australasia. Mozambique and Afghanistan occupy the lowest positions.

Personal security a concern for SA pensioners

South Africa lies in 80th position. According to statistics used in the index, 92% of South Africans aged 65 and older received a pension. Sixty-year-old South Africans could expect to live 16 years more on average, compared with the an average 17 more years, which their peers in other index-ranked African countries could expect.

Eighty-three percent of older South Africans surveyed said they had someone to turn to in a crisis, indicating they felt socially connected.

South Africa was ranked 19th for elderly income security, and 83rd for an enabling environment, but the index revealed that personal security of the elderly remained an area of concern.

The best-performing African countries were Mauritius (38), followed by South Africa, Ghana (81) and Morocco (83).

Most African countries were ranked low in the index. These countries had predominantly young populations and ageing issues did not often enjoy priority on domestic policy agendas.

Few African countries were included in the index because they lacked internationally comparable data sets on older people.