SHAPING THE FUTURE HOW CHANGING DEMOGRAPHICS CAN POWER HUMAN DEVELOPMENT

BOX 4.5:
China moves towards universal social security for older people
In recent years, China has initiated various social
protection measures aimed at universal pension
coverage. Before 2009, it mainly had two mechanisms
for income security among older people:
one for civil servants and other employees, based
on employer contributions, and another for urban
workers, based on social insurance principles.
Together, the two schemes covered around 250
million people in 2008, about 23 percent of the
population aged 15 and above.
Starting in 2009, China established the New Rural
Pension Scheme, and in mid-2011, it announced
a national pilot Urban Residents Pension Scheme.
These measures were aimed at completing a national
framework for universal pension coverage.
Participation is voluntary. To encourage people
to join, the pensions consist of two components:
a social pension paid by the Government, and an
individual savings account financed jointly by individuals,
collective entities such as state-owned
enterprises and the Government. A minimum level
set for the social pension can be higher if local
governments can fund it.
By the end of 2013, between the pre- and post-
2009 schemes, 850 million people, nearly 75
percent of the population aged 15 and above, was
covered by a pension.
To address issues of adequacy, equality and sustainability
in the schemes, in 2013, China embarked
on a number of major reforms. These have included
merging the two newer schemes to equalize entitlements,
allowing ‘portability’ so that entitlements can
move between the merged schemes and others,
and converting employers’ liability for civil servants
into a social insurance pension scheme.
The Chinese experience shows that if there is
political will, extending pension coverage to all
citizens within a very short period is feasible. It
also demonstrates how combining contributory
schemes and non-contributory social pensions
may be an effective way to achieve universality.
Source: ILO 2014a.
adequate pension in old age.
As a step towards universal public pension
coverage, many countries have established some
form of publicly funded social pension, varying in
coverage, sufficiency and cost (Table 4.3). Social
pensions are an important way to extend coverage
to those without access to contributory pension
systems and provide the elderly with protection
against poverty. The growing importance of
these programmes responds to rapid ageing, low
coverage of contributory pension schemes, a large
informal sector and the weakening of traditional
family support systems. Coverage now exceeds
that of contributory systems, which reach only
around 20 percent of the elderly.
Malaysia, the Philippines, the Republic of
Korea, Thailand and Viet Nam all have social
pension programmes, but most provide limited
support, for which a means test, either by income
or age, is required. In Viet Nam, only those aged
85 and over and without pensions are eligible,
and the current payment level is about $7.50 per
month. Nepal’s monthly social pension is just
$5, and surveys of elderly persons have found
complaints with paltry sums. 56
Globally, just over half of people above the
legal retirement age receive pensions. 57 Coverage
is as low as 22 percent in Africa and as high as
over 90 percent in North America, Western
Europe, and Central and Eastern Europe (Figure
4.10). 58 Where many people work in informal
employment, are self-employed or are under
temporary contracts, a smaller proportion of
people will receive pensions. 59 Many more can
rely only on family support or savings they
have cobbled together. 60 Migration introduces
another dimension. While young people who
have moved away from rural areas to live in
cities may become eligible for participation in
public pension programmes, large numbers of
older people left behind in the countryside are
not entitled to benefits based on employment. 61
In Asia-Pacific, pension coverage, including
by non-contributory pensions, hovers around
the global average of about 47 percent, but falls
sharply to just over 32 percent if China is exclud-
Pension systems
are still weak and
fragmented in
the region
131