Veritas propter investigationem [Truth through research]
TitleInternational Patterns Of Pension Provision II - A Worldwide Overview of Facts and Figures (2012)
AuthorsMontserrat Pallares-Miralles
 Carolina Romero
 Edward Whitehouse
InstitutionWorld Bank
TopicsPension system description
 Pension design principles
 International comparisons
 Retirement income adequacy
 Implicit pension debt
Date Published2012
Date posted on PR22 Oct 2012
Pallares-Miralles, M Romero, C Whitehouse, E, (2012). International Patterns Of Pension Provision II - A Worldwide Overview of Facts and Figures (2012) World Bank,

PensionReforms’ summary and comments

In 2000, the World Bank published International Patterns of Pension Provision.  This 2012 report updates and expands the original version as much has changed in the last decade.


The report is in three sections: the first looks at each country’s environment (demographic, labour market and fiscal conditions).  The second describes each country’s pensions architecture with specific regard to the country’s ‘national scheme’.  Part III then measures pension indicators according to “six key criteria”:

(i) coverage (ii) adequacy (iii) financial sustainability (iv) economic efficiency (i.e., minimizing the distortions of the retirement income system on individuals’ behavior, such as labor supply and savings outside of pension plans), (v) administrative efficiency and (vi) security of benefits in the face of different risks and uncertainties.”


The World Bank expects to expand the number of countries covered by its analysis.


Almost 70 percent of all persons currently age 65 or older live in developing countries (low and middle-income economies). This percentage has been increasing and this trend will continue.  By the year 2040, more than 88 percent of the elderly are projected to live in developing countries.”


The report suggests that it is still work in progress:

“There are still important gaps to be addressed, however.  A major source of useful information is household surveys that contain information about the relative incomes and poverty rates of elderly individuals as well as information on household structures that are changing in many countries in ways that can influence the need for pension provision.  Social pensions are being introduced or expanded in many countries, but cross-country data on their performance is scarce.”


So-called “indicators of adequacy” could also include out-of-pocket health costs that significantly affect the old.


The report then expresses concern about the “sustainability of unfunded pension schemes” and thinks there should be an internationally accepted way to measure those.


“As these liabilities become more prominent, even in poor countries with young populations, robust measures reported regularly are required for better planning and to inform policy.”


There also needs to be more work done on coverage in contributory systems where workers move in and out of the ‘covered’ workforce.  The issue here is contribution densities; also whether or not workers “…have amassed pension wealth and are in a position to finance their retirement.”  Under contributory systems, the sustainability of pension schemes depends in many countries on the size of the ‘informal’ labour markets.  Labour force participation rates range from more than 80% in East Asia and the Pacific down to less than 60% in the Middle East and North Africa.


The design of pension schemes also affect labour markets: contribution requirements encourage ‘informality’; labour force participation rates amongst the old are directly affected by the design of the pensions themselves.


The report suggests that this latest version of its International Patterns shows that much work is still required on the gathering and comparing of pensions data.  Selected data are available as retrievable spreadsheets in the World Bank Pensions here.


PensionReforms thinks it is useful to bring comparable data together in a report of this kind.  There are no real surprises in any of the basic data about each country’s ‘environment’.  The detailed comparisons might prompt countries into thinking about what they do now.


PensionReforms continues to question the use of “net replacement rates” that feature in the report’s section on ‘pensions architecture’.  They compare the uncomparable and are based on hypothetical full-career, average workers who are entering the work force now.  The report says that “The intention behind the standardized approach is to isolate the specific design issues that can be compared across countries.”  But, given the comparison looks only at ‘compulsory’ local arrangements, it can offer no real insight into the relative generosity, let alone the success of a retirement income system’s objectives (or even just the scheme’s objectives).  Citizens make their individual decisions in the context of the state’s ‘compulsory’ provision.  Retirement wealth is what matters, not pension wealth.  It doesn’t really matter whether that wealth is private or public.


PensionReforms also suggests that the valuation of “accrued pension liabilities” is a pointless exercise, even though the European Union has started to report these numbers.  A country is not a private sector employer – see here [] for more on why that is unhelpful.


The report suggests that “the ultimate measure against which any pension system should be evaluated is the ability to effectively deliver the promised benefits in an efficient and secure manner over multiple generations.”  If that is supposed to be a public policy objective, PensionReforms begs to differ.  The public policy objective should be to alleviate or, preferably, to eliminate poverty in old age.  The higher of those two objectives cannot be met with a coverage level of less than 100%; nor from an arrangement that discriminates against women; nor from a system that delivers lump sums at the State Pension Age, no matter whether promised benefits are “delivered…in an efficient and secure manner” or not.


The ‘success’ of a pension system becomes one of empirical measurement rather than of ‘pension replacement rates’.  How do we define ‘poverty’ and how many of our old live in ‘poverty’?  PensionReforms is pleased to see that the World Bank “is in the process of using household expenditure surveys for countries that report this source of income to calculate this indicator”.  The World Bank should be encouraging all countries to produce that data. (File size 2.3 MB; 214 pp) 608