Pensions & Aging

Adults over 60 are the fastest-growing demographic across the world. This shift will impact labor, immigration, health care, social protection systems and economies. Rapidly aging societies need adaptable strategies for healthy longevity and adequate income support for the elderly and persons with disabilities.

Given the limited success of contributory pension schemes to extend coverage over time, old-age social pensions, which provide an alternative source of income for elderly adults, have been gradually extended in developing countries in recent years. Social pensions cover close to  35%  of the population ages 60 years and older in OECD countries and in the Europe and Central Asia, East Asia and Pacific, Latin America and the Caribbean, and South Asia regions.  They have proven to be the most effective tool to provide income support to the most vulnerable elderly population and persons with disabilities.  At the same time, their extension is challenged by fiscal constraints and potential negative effects on incentives.

The informal sector is heterogeneous and includes, in addition to the poor population, higher income groups with some financial capacity to save for retirement.  For this group, the main challenge to extend coverage is the absence of savings schemes customized for their needs.  Recent analytical work produced in Africa, South Asia, and Latin America and the Caribbean has expanded the options to cover informal workers as well as self-employed and platform workers.

The World Bank Group helps governments analyze, design, and reform pensions and social insurance policies to improve coverage, ensure fiscal sustainability, and provide adequate support for vulnerable groups. The World Bank’s social protection strategy focuses on extending working careers and providing long-term care in response to ageing populations.

Globally, more than two-thirds of government spending is on social services on old age, disability, and survivor pensions. However, these programs face significant challenges as populations age:

Coverage: Only one in three workers worldwide contribute to pension scheme, and just one in ten in low-income countries. Nonetheless, extension of non-contributory and social programs has expanded coverage in several countries.

Sustainability: Most public pension systems are not financially viable, raising concerns about younger, future retirees’ benefits.

Adequacy: Fiscal constraints often lead to insufficient benefit levels. Social pensions should at least fill poverty gaps and address health needs for the elderly and disabled.

Efficiency: Many private pension systems incur high costs, and pension fund assets are not always invested productively for the long term.

Security: Pension assets must be securely governed, invested, and supervised. Unique IDs are needed to track contributions and claims, ensuring promised benefits are paid.

Productive inclusion of older workers: As populations age, extending working lives is essential. This requires targeted skills programs for older workers to keep them employable and productive.

Long-term care: Costs related to long-term care can severely impact the elderly, persons with disabilities, and their households, posing significant financial burdens.

The World Bank addresses these challenges through policy dialogue and technical assistance, helping countries build more inclusive, sustainable, and effective pension and social insurance systems that adapt to demographic changes while protecting the most vulnerable.

• MasterCard Foundation
• UNESCO Institute for Statistics
• Gates Foundation