Title: Pension Systems in AsiaPacific: Main Issues and Diagnosis
1Pension Systems in Asia-Pacific Main Issues and
Diagnosis
- Presentation by
- Michiel Van der Auwera
- 16 October 2007
- AFDC
2Overview
- Socio-economic challenges
- Review of existing pension situation in Asia
- Way forward
- identifying need for reform
- contribution of multilateral development banks
3I . Socio-economic challenges
- Ageing population
- Declining family support for elderly people
- Globalization
4Ageing population
- Asian population grew from 1.4 billion people in
1950 to 3.7 billion in 2000 - Demographic transition from high fertility and
mortality rates to low fertility and mortality
rates
5Demographic dividend
4
3
Demographic dividend
2
1
6Rapid ageing
7results in increased public spending on pensions
- If the past relationship between demography and
public spending on old-age pensions continue - Expenditure of national income devoted to
pensions in Asia, excluding China, will rise from
2 in 1990 to 10 in 2050 - Expenditure of national income devoted to
pensions in China will rise from 3 in 1990 to
over 13 in 2050
82. Declining family support for elderly
- Traditionally, Asian families provide support for
the elderly relatives - Increased mobility from rural to urban areas is
weakening traditional support - Changing family structure declining birth rates,
increasing number of single head households
9needs to be supplemented by formal mechanisms
- Pure market solutions (individual savings) work
to some extent, but often fail - Shortsighted behavior, leading to insufficient
saving when young - Lack of reliable savings instruments
- Governments interventions are required
- Mandatory pensions plans, means-tested assistance
- Regulation and supervision, information,
103. Globalization
- Increased integration of markets and growing
mobility across the world - Labor market policies need to balance between
addressing inequality and efficiency
11requires adjusted pension design
- Public programs, including pension schemes, will
have to be adjusted - Pension designed to accommodate mobility of the
labor force, not only between public and private
sector, but also across states
12II. Pension systems in Asia
13Major areas of concern
- DB schemes fiscal sustainability link between
contributions and benefits - Funded schemes investment policy and performance
- Overall
- governance and management of the pension systems
- limited coverage
14Changing environment for Asian pension systems
- New requirements
- Increased demand for old-age protection
- Increased formalization
- Increased flexibility
- Existing situation
- Limited coverage
- Need for improved governance
- Need for improved pension design
15III. Way forward
- Objective pension systems that deliver adequate
and affordable benefits in sustainable way - Reform towards multi-pillar pension systems
- A long-term endeavor!
- World Bank. 2005. Old-Age Income Support in
the Twenty-first Century An International
Perspective on Pension Systems and Reform
(Holzmann, R. and others)
16Basic goals of pensions
- Reducing or preventing poverty among the elderly
- Providing adequate retirement income, maintaining
same standard of living, smoothing of lifetime
consumption - Encourage economic growth through increased
saving - These goals can be addressed by a multi-pillar
pension system
17Multi-pillar pension system
18Interaction between pillars Example Finland
19Role of Multilateral Development Banks
- Raise awareness among policy makers
- Assist in pension reform when support is required
- Available tools
- TA to prepare reform
- Loan programs to assist in implementation
20ADB pension projects, 19902004
21Pension reform needs
- Following Asian financial crisis focus on
strengthening financial market institutions - Emerging reform needs
- sustainability of the maturing pension systems
- adequacy and affordability of the pension systems
for the ageing population - Pension reform in Asia and Pacific is still at
the initial stage
22For More Information
- (Michiel Van der Auwera, e-mail
mvanderauwera_at_adb.org) - Web site www.adb.org