Ageing in the Twenty-First Century: - HelpAge International

The global financial and economic crisis:
Impact on older persons
The global financial and economic crisis affected social
security systems, pension funds, savings and other sources
of income of most older persons around the world.
The significant declines in the value of retirement savings
accounts, investments, savings and land and housing
resulted in a severe decline in the value of assets that
older persons were counting on for their retirement years.
Part of the decline in the value of the assets of private
pension funds in developed countries was due to
unemployment and contractions of contributions to
pension funds, as the hours worked and the wages of
those fortunate to have jobs declined in many countries.
However, the main cause of the decline was the large
negative rate of return of the funds. In some cases, employers
reduced or eliminated their contributions to employees’
retirement schemes in order to maintain jobs. Retirees and
workers near retirement age were most severely affected.
While the impact of the crisis on pension systems has hurt
those covered, the much larger number of older workers
who lack social security coverage were also severely affected.
Families are not always in a financial position to provide
support and governments do not have formal pension
systems to cover all older persons, including those employed
in the informal sector, while the value of any savings
declined. Rising inflation, especially of food and fuel,
has exacerbated the situation for older persons in both
developed and developing countries.
Source: UNDESA, World Population Ageing 2009 (New York, 2010).
It is critical to distinguish between the capacity of
economies to provide pensions or social protection to a
growing number of older persons – which is determined
by the production of goods and services, and by
developments in labour productivity and overall factor
productivity – and the willingness of countries to
maintain the pensions of a growing number of older
persons – which is determined by the readiness of
society to distribute goods and services, or income. 68
In general, questions of solidarity, accessibility,
affordability and sustainability are at the centre of all
old-age pension system design and reform. 69 There is no
“one-size-fits-all” approach but most countries seek to
ensure these principles through pension schemes that
are designed on the basis of several pillars addressing
specific needs, complementing each other and adapted
to specific circumstances in a country. These pillars are
composed of a combination of elements: contributory
systems that are linked to earnings; a pillar based on
individual savings; and non-contributory (social)
pensions that provide a minimal level of protection for all
people or for those excluded by the contributory system.
Different combinations of these elements can be found
in different countries. These combinations also reflect
societal preferences and political bargaining in terms of
redistribution of resources within and between generations.
Extending pension coverage through
non-contributory schemes
Despite continuing low coverage of social security, some
notable progress has been made in the last decade in
extending pension coverage, especially in developing
countries. In particular, a number of countries have
put in place social (non-contributory) pensions, often
in recognition of persistent low coverage of their
pension systems and pervasive poverty in old age.
Some developed countries also increased the level of
minimum pensions, as for example the United Kingdom,
where the Government increased the real amount of
the pension credit minimum income guarantee by
4.8 per cent in response to the crisis. 70
According to HelpAge International’s Social Pensions
database, over 100 countries have social pensions and
more than 20 countries have introduced or significantly
extended social pensions in the last decade (see Tables 1
and 2). For the 53 schemes where there are data, the
number of people receiving a social pension adds up
to 55 million older people (or around 7 per cent of the
older population globally). 71
47