SHAPING THE FUTURE HOW CHANGING DEMOGRAPHICS CAN POWER HUMAN DEVELOPMENT

BOX 4.7:
Increasing links between public and private pension schemes
Demographic shifts have catalysed a re-evaluation
of pension schemes worldwide. Increasingly common
elements, which are often used in combination,
include non-contributory schemes such as a social
pension, contributory schemes scaled to varying
degrees of earnings, mandatory individual savings
accounts, and flexible and discretionary arrangements
through employers. Familial assistance can
also be significant.
The Danish retirement scheme provides opportunities
for citizens to contribute to private pension
funds while simultaneously guaranteeing basic
old-age pensions scaled to prior occupations. The
system has grown from entirely public to partly
private to meet the future challenge of an older
population. Population longevity is being linked
to increases in retirement age, with a predicted
pension age of 69 by 2050.
In Australia, the retirement income system synthesizes
a means-tested age pension, paid from
general government revenue, with a mandatory
employer contribution to private sector plans. The
means-tested pension provides a basic income
to those whose incomes or assets do not meet
specified levels. The mandatory retirement saving
programme, known as the Superannuation Guarantee,
requires employers to contribute 9 percent
of earnings, rising to 12 percent by 2020. A final
element is voluntary saving.
Chile’s system incorporates means-tested social
assistance with mandatory privately managed
defined contribution and employer-sponsored
supplementary plans. Any retiree who has worked
at least 20 years and whose pension falls below
the minimum level receives additional support to
reach that level.
With continued improvements in life expectancy
and mortality, the financial sustainability of pension
models has been increasingly questioned, particularly
where early retirement has placed a strain on
reserves. In Germany, the benefits of the national
scheme go disproportionately to older generations
while younger people face higher contribution requirements.
This can reduce incentives to remain
in the labour force and lead to full withdrawal of
pension funds and an early retirement.
Rising pressure to reform public pension systems
to contain costs is often spurred by the need to
increase domestic fiscal stability and sustainability.
Implementing these reforms, however, can incur
high administrative costs, and could potentially
result in public protests and political instability, underscoring
the need to carefully consider different
elements in the process of reform and in aiming for
sustainability.
Private pension systems may be an appropriate
support to public schemes. Policy options to increase
cooperation between the two include compulsory
or automatic enrolment to raise coverage
rates, encouragement to contribute larger amounts
for longer periods of time through measures such
as increasing retirement age, and establishing outreach
programmes to target population subgroups
requiring improved access to private pensions.
Decent, appropriate
housing can
contribute to active
ageing and well-being
Sources: Nguyen 2002, Mason and Lee 2011, Holzmann and Hinz 2005, Abrahamson and Webner 2003, Williams and Fixsen
2012, Melbourne Mercer Global Pension Index 2015, Melbourne Mercer Global Pension Index 2015a, Melbourne Mercer Global
Pension Index 2015b, Agnew 2013, The economist 2014b, The Economist 2014c, Longman 2015.
to live alone, elderly communities will increase,
making accessibility even more important. To
fully align with human development and human
rights, these communities will have to
be equipped with facilities for transportation,
grocery stores, pharmacies, medical facilities,
social support services and public parks. Such
amenities help older people living alone to stay
independent, healthy and happy, and to continue
contributing to their communities.
Ageing in place is an important concept that
encourages measures allowing seniors to continue
living in their own homes and communities, 76
recognizing that the nature and suitability of
housing is one of the major determinants of older
people’s well-being. 77 Older people spend more
time at home or in their neighbourhood than
other age groups. 78 While decent, appropriate
housing can contribute to active ageing and
well-being, poor housing exacerbates chronic
conditions and disability. Falls among older
people are a major cause of lost independence,
with home environments proven to influence
their likelihood.
Only some countries in the region have
policies or programmes to enable older persons to
137