PensionReforms
Veritas propter investigationem [Truth through research]
 
TitleReforming Pensions in Developing and Transition Countries (2014)
  
InstitutionUnited Nations Research Institute for Social Development
TopicsPension design principles
 Public pension reform
 Reform evaluations
 Financing public pensions
 International comparisons
CountryInternational
Date Published2014
Date posted on PR16 Sep 2014
  
  
 
(2014). Reforming Pensions in Developing and Transition Countries (2014) United Nations Research Institute for Social Development,

PensionReforms’ summary and comments

UNRISD (the United Nations Research Institute for Social Development) has released a major publication on pension reform in developing and transitional countries.  The 368-page volume contains nine chapters of case studies written by various scholars.  The whole publication is not freely accessible on-line and so does not qualify for coverage on PensionReforms.  We think it a shame that such an important UN publication should cost $US115 (plus shipping).

 

However, we can get the flavor of the book from the 38-page introduction authored by Katja Hujo that is available on-line at the link below.

 

Pension systems around the world are constantly changing but coverage levels seem related to a country’s wealth:

“…current coverage levels measured as the share of population above the legal retirement age in receipt of a pension are above or close to 90 per cent in Europe and the Commonwealth of Independent States (CIS), around 50 per cent in Latin America and the Caribbean, around 30 per cent in Asia, North Africa and the Middle East, and 15 per cent in Sub-Saharan Africa.”

 

The cost of old-age related public expenditure, unsurprisingly, has a similar pattern.

 

“…poverty in old age is still a challenge, especially but not exclusively for low-income countries with low spending and coverage rates, but also because pension benefits are often too small to lift the elderly above the poverty line.”

 

The design of pension arrangements “…reflect how societies recognize different types of paid and unpaid work, how they redistribute income and risk across gender, income groups and generations and what role they attribute to public and private institutions in social protection.”

 

The book as a whole contains eight country-case studies (Korea, Brazil, India, China, South Africa, Bolivia, Argentina and Chile) and two others about ‘Central Eastern Europe’, also Middle East and Africa.

 

This introduction “lays out some of the key concepts and debates around old-age protection and pension reform in a development and transition context.”

 

Debates on pension reforms seem “…framed in a blunt bipolar view, neoclassical monetarist economists tend to favour funded, non-redistributive, private, decentralized defined-contribution schemes, while other economic and social science schools of thought tend to argue for the superiority of PAYG, redistributive, public, centralized defined-benefit pension systems.”

 

The chapter summarises the historical place of pensions and their various reforms.  The thirty countries that have ‘privatised’ public pensions have found that this cannot be the only answer and some have even reversed those decisions or significantly modified them:

“…increased disappointment with privatized pension systems led to revisions in the policy advice offered by international organizations as well as to follow-up reforms and even the renationalization of pension accounts in Argentina, Bolivia and Hungary.”

 

PensionReforms notes that the book as a whole pays little attention to Universal Pensions, as PensionReforms defines that expression (paid to everyone).  Instead it concentrates on social assistance (means-tested) pensions and on contributory pensions.

 

It uses an overly (in PensionReforms’ view) broad definition of ‘universal’, which includes pension-tested schemes.  If a social pension is given only to those without a contributory pension (or too small a pension), by definition it excludes part of the elderly population, so is not universal.

 

The most comprehensive treatment of universal pensions (without using the term!) is in the first sentence of last paragraph of p. 18:

“Most countries have social pensions that target the elderly poor, but some countries have implemented non-contributory pension programmes covering all citizens and residents in the country – as in Bolivia, Nepal, Mauritius, New Zealand and Brazil (rural sector).”

 

PensionReforms thinks a number of examples of Universal Pensions in developing countries could (and should) have been added to this list: most notably rural Mexico, Mexico City, Namibia and Botswana, but also Guyana, Samoa, Brunei and Kosovo.  Regrettably, there is no case study of Mauritius, a country with a long and successful history of universal pensions (from 1958).  More regrettably, there is almost no mention of Mauritius in the rest of the book, and the sentence above is the only mention of New Zealand.  Neither Mauritius nor New Zealand is listed in the book's extensive index.  In each example of the ‘missing’ countries, PensionReforms has linked to a report that explains what those countries’ public pensions look like.

 

“As with other social transfers and services, opinions diverge on the pros and cons of targeted versus universal social provisioning.  As Chapters 9 [on Bolivia] and 10 [on Argentina and Chile] explore in more detail, there are strong arguments in favour of universal schemes in countries with widespread poverty, weak administrative systems and where there is a need to strengthen social cohesion, a sense of citizenship and social solidarity. On the other hand, international financial institutions (IFIs) tend to favour the introduction of means-tested targeted transfers because they hold that these schemes are less costly and more effective in terms of poverty reduction.”

 

PensionReforms suspects that IFIs favour private schemes because that is the business they are in.  State scheme entitlements tend to crowd-out the need for private provision.

 

Support in the book for a Universal Pension is at best tepid.  Strong arguments exist for Universal Pensions even in countries like New Zealand and Mauritius, which do not have widespread poverty nor weak administrative systems.  PensionReforms thinks it is a pity that the case for Universal Pensions was not articulated better.

 

The full publication is available here for $US115 (plus shipping costs).

 

(File size – introduction only: 693 KB; 38 pp) 700

 

 

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