Pension Patterns and Challenges in Sub-Saharan Africa World Core Course April 30, 2015

Mark C. Dorfman Pensions Global Solutions Group The World Bank Organization

1. Patterns & Challenges a. Scheme Design b. Enabling conditions: Demographics, composition, poverty and growth c. Coverage d. Adequacy and affordability e. Sustainability 2. Questions for discussion Scheme Design

3 Pension scheme design National Scheme Separate or Integrated with National Civil Servants Schemes Design Scheme Contributory and Funding Non-Contributory Elderly Assistance Separate from Integrated with Occupational National National Scheme (no national Provident Funded Scheme Scheme scheme) PAYG Pension- Means- Pilot PAYG DB Fund DC Noncontrib. DB FDB FDC Universal Tested Tested Scheme 1 Angola √ √ √ 2 Benin √ √ √ 3 √ √ √ 4 √ √ √ 5 √ √ √ 6 √ √ √ 7 Cape Verde √ √ 1/ √ √ 8 Central African Rep. √ √ √ 9 Chad √ √ √ 10 Congo, Dem. Rep. √ √ √ 11 Congo, Rep. √ √ √ 12 Cote d'Ivoire √ √ √ 13 Ethiopia √ √ √ 14 Gambia, The √ √ √ 15 Ghana √ √ √ 2/ √ √ 16 Guinea √ √ √ 17 Guinea-Bissau √ √ √ 18 √ √ √ √ 19 Lesotho √ √ √ 20 Liberia √ √ 3/ √ 21 Madagascar √ √ √ 22 √ √ √ 23 Mali √ √ √ 24 Mauritania √ √ √ 25 √ √ √ √ 26 √ √ √ √ 27 √ √ √ 28 Niger √ √ √ 29 √ √ √ √ 30 √ √ √ 31 Sao Tome & Principe √ √ √ 32 √ √ √ 33 Seychelles √ √ √ √ 34 √ √ 4/ √ 35 Somaliland 5/ 5/ 36 √ √ √ √ 37 South 5/ 5/ 38 Sudan √ √ 7/ 39 Swaziland √ √ √ √ 40 √ √ √ 41 Togo √ √ √ 42 √ √ √ √ 43 √ √ 6/ √ √ 44 √ √ √

1/ Integrated for civil servants hired beginning in 2005.

2/ Integrated first in 1972 and then further integrated in 1991. 3/ Civil servants are integrated into the national scheme and some receive a supplementary benefit from the Treasury. 4/ Integrated for new civil servants beginning in 2002. 5/ Legislation is being developed to constitute a formal pension scheme for civil servants.

6/ Integrated for new civil servants hired after January 1, 2010. 7/ The contributions for the civil service scheme cannot be identified. Enabling Conditions: Demographics, Household Composition, Poverty & Growth

5 Dependency Rates – low but growing Projected Old Age Dependency Ratios (Age 65+/age 15-64)

Source: World Bank database based on World Population Projections, 2010 revision. Note: Mauritius and Seychelles have not been included. Demographic window offers a positive environment for reform Total Projections (Percent) 120

100 2010 2050

80

60

Total Depdency Rate Depdency Total 40

20

0

Source: United Nations, Population Division, Population Projections, 2012 Revision, Household composition 87% of elderly live with non-elderly

Percent of elderly living in with non-elderly 100.0% Median = 86.7% 90.0%

80.0%

70.0%

60.0%

50.0%

40.0%

30.0%

20.0%

10.0%

0.0%

Source: World Bank ASPIRE database, accessed November 2014. Growth Projections offer a Positive Environment for Most

Recent and Projected Annual Real GDP Growth Rates 15.0% 1995-2009 2010-2014 Projected 2015-2019

13.2% 12.9%

12.1% 11.5%11.5% 11.1% 10.8% 10.5% 10.0%10.1%10.1% 9.8% 9.9%10.0% 10.0% 9.3% 8.9% 9.0% 9.0% 9.0% 8.6% 8.7% 8.4% 8.4% 8.6% 8.2% 8.4% 8.1% 8.1% 8.2% 7.7% 7.8% 7.7% 7.2% 7.0% 7.1% 7.1% 7.1% 6.8% 6.8% 6.6% 6.2% 6.0% 5.8% 5.5% 5.7% 5.6%

5.0% 4.6%

4.3% GDP Growth GDP

0.0%

-5.0% Source: IMF World Economic Outlook Database, 2015. High poverty levels < $1.25/day & weak correlation with GDP/capita GDP per capita and Poverty Headcount (US$ left axis, percent right axis) 12,000 100 GDP per Capita - US$ - PPP

87.7 90 Poverty Headcount (% of 'Poverty & Income per Capita (% of Population - 83.8 US$1.25/day) 10,000 81.3 80 74.5 72.1 68.0 67.9 67.8 70 8,000 62.8 61.6

PPP 59.6

- 60 54.1 US$ US$ 51.7 - 50.4 6,000 50 44.6 43.6 43.4 43.4 43.3 40.6 38.7 38.0 40

GDP Per Capita Capita Per GDP 33.5 % of Population ($1.25/day) Population % of

4,000 30.7 - 28.6 30 23.8 23.4 19.8 20 2,000 13.8 9.6 10 Headcount Poverty

- 0

Source: World Economic Indicators, 2012. Note: Poverty headcount is from the most recent year between 2005 and 2012. The GDP per capita data is from 2012. The lack of uniformity between the poverty headcount figures and the GDP per capita figures reflects the difference in data points. Coverage

11 What is the coverage gap?

• Social pensions in 8 of 47 countries + very weak SSNs Coverage Gaps • Poor but improving regulation of occupational schemes.

Occupational & retirement - Individual Pensions

Social assistance for Minimum Pension households &/or elderly. Mandatory, contributory

scheme Pension benefit as a percent of individual pre percentbenefitindividualofaas Pension Individual pre-retirement wage as a % of the average wage in the economy Key Challenge – Labor force coverage

60%

Occupational Schemes Civil Service National Scheme 50% 70%

60%

40% 50% Civil Service Coverage as a % of Total

40% 68.6%

30% 30% 20% 51.6%

10% %of Labor ForceCovered

20% 0%

25.5% 10% 18.8%17.6% 12.8% 10.4% 10.4% 11.4% 8.8%9.4% 10.0% 6.8%7.9% 7.6% 5.2% 5.8% 3.7% 4.8%4.9% 4.2%4.5%5.0%5.0% 4.9% 2.0% 2.1% 2.5% 3.1%

0% 0.8%0.8% 1.5%0.9% 1.7%

Mali

Togo

Chad

Niger

Benin

Kenya

Sudan

Ghana

Liberia

Angola

Nigeria

Zambia

Malawi

Uganda

Senegal

Lesotho Burundi

Namibia

Tanzania

Mauritius

Botswana

Swaziland

Seychelles

Cameroon

Zimbabwe

Rwanda 1/ Rwanda

Ethiopia 1/ Ethiopia

Mauritania

Cape Verde Cape

Congo, Rep. Congo,

Madagascar

South Africa South

Sierra Leone Sierra

Gambia, The Gambia,

Cote d'Ivoire Cote

Burkina Faso Burkina

Mozambique

Sao Tome and… Tome Sao

Central African… Central Congo, Dem. Rep. Dem. Congo, Coverage – strongly correlated w/GDP per capita

60.0% Mauritius South National Scheme + Civil Service Scheme + Occupational Scheme Africa Coverage (% of Labour Force) y = 3E-05x + 0.0159 R² = 0.6771

50.0%

Active coverage vs Income per capita

1 y = -5E-10x2 + 4E-05x + 0.0198 R² = 0.807 0.9 40.0% 0.8

0.7 Swaziland 0.6

0.5

30.0% 0.4

0.3 0.2

Active members members Active (% Working Age Population) 0.1 Ghana The Gambia

20.0% 0 0 Niger 10000 20000 30000 40000 50000 60000 Zimbabwe Nigeria Income per capita (Thousands) Sao Tome & Principe Malawi, DRC, Mauritania Botswana Central African Zambia Cape Verde Namibia Republic, Niger Kenya Ghana 10.0% Sierra Leone Burundi Cote d' Ivoire Republic of Congo

Liberia Senegal Sudan Lesotho Tanzania, Burkina Faso, Togo, Chad Ethiopia Rwanda Angola 0.0% - 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 Contributory pensions generally cover those w/wage incomes & better off in retirement

40.0%

35.0%

30.0%

25.0%

20.0%

15.0%

10.0%

5.0%

0.0%

Coverage in poorest quintile (%) - Old Age Contributory Coverage in 2nd quintile (%) - Old Age Contributory Coverage in 3rd quintile (%) - Old Age Contributory Coverage in 4th quintile (%) - Old Age Contributory Coverage in richest quintile (%) - Old Age Contributory

Source: The World Bank, ASPIRE database, 2014 Elderly coverage weak (except in countries with non-contributory schemes)

Elderly and Labor Force Coverage (Late 2000s; percent of elderly over eligibility age; percent of labor force) 100 98.5 100.0100.0100.0100.0 92.9 94.3 89.2 90 93.092.4 93.1 89.1 Elderly Coverage Labor Force Coverage 86.0 80

69.7 70 73.4

65.0 60 57.5

56.1 50 51.5 47.0 41.4 44.3 39.0 40 37.138.0 34.0 33.6 29.5

30 Percent (of elderly or labor force) labor or elderly (of Percent 29.5 25 20.1 20 16.6 17.4

11.0 11.8 9.3 8.8 8.9 10.09.8 10 7.4 7.7 12 7.3 5.5 5.4 6.3 6.1 5.8 5.6 5.3 5.2 4.2 4.5 4.5 4.0 3.2 3.6 2.8 3.2 9 93.4 2.7 1.5 1.7 7.7 7.9 2.3 1.3 0.9 1.6 2.0 2.7 2.7 3.1 3.2 3.7 3.8 4.1 4.1 4.4 4.6 5.4 5.7 6.11.3 6.5 6.6 0.0 1.0 0.7

-

Mali

Togo

Chad

Niger

Benin

Kenya

Sudan

World

Ghana

Liberia

Guinea

Nigeria

Zambia

Malawi

Median

Uganda

Senegal

Burundi Lesotho

Rwanda

Average

Ethiopia

Namibia

Tanzania

Mauritius

Botswana

Swaziland

Seychelles

Zimbabwe Cameroon

Mauritania

CapeVerde

MiddleEast

Congo, Rep. Congo,

Madagascar

South Africa South

Sierra Leone Sierra

Gambia, The Gambia,

Cote d'Ivoire Cote

Burkina Faso Burkina

Mozambique

NorthAmerica

Western Europe Western

Congo, Dem. Rep. Congo,

Asia and the Pacific and Asia the

Developedeconomies

Developing economies Developing

Sao Tome and Principe Tome Sao

Central African Republic African Central Central and Eastern Central Europe

Latin America and the Caribbean and America the Sources: ILO, World Bank, country administrative data. What has contributed to the coverage challenge? . Low, volatile & non-wage incomes (w/populations substantially rural and informal) . - contributory schemes best aligned to formal sector  Contribution rates may discourage coverage & compliance  Vesting periods penalize informality  Discretionary indexation creates uncertainty  Compliance & enforcement costly • Voluntary occupational & individual schemes offer options but need to be better regulated & supervised in many countries to ensure public confidence. Adequacy & Affordability

18 Adequacy of non-contributory pensions – tension with coverage and cost

…target replacement rates in some cases too high to be widely afforded or sustained 100.00% Simulated Replacement Rates 90.00% National Scheme Civil Service Scheme 80.00%

70.00%

60.00%

50.00%

40.00%

30.00%

20.00% Calculated Replacement Rate (30 years of covered service) covered of years (30 Rate Replacement Calculated 10.00%

0.00%

Mali

Togo

Chad

Niger

Benin

Kenya

Sudan

Ghana

Liberia

Angola

Guinea

Zambia

Malawi

Uganda

Senegal

Burundi

Lesotho

Rwanda

Ethiopia

Namibia

Tanzania

Mauritius

Swaziland

Seychelles

Cameroon

Zimbabwe

Mauritania

Cape VerdeCape

Congo,Rep.

Madagascar

SouthAfrica

SierraLeone

Gambia,The

Coted'Ivoire

Burkina Faso

Mozambique

Congo,Dem. Rep.

SaoTome and Principe CentralAfrican Republic Source: Social Programs throughout the World: Africa 2013; and Bank estimates. …Contribution rates linked to target income replacement & scope of benefits

35.0% Contribution Rates 30.0%

25.0%

20.0%

15.0%

10.0%

5.0%

0.0%

Mali

Togo

Chad

Niger

Benin

Kenya

Sudan

Ghana

Liberia

Angola

Guinea

Nigeria

Zambia

Malawi

Median

Uganda

Senegal

Lesotho Burundi

Rwanda

Average

Ethiopia

Namibia

Tanzania

Mauritius

Botswana

Swaziland

Seychelles

Zimbabwe Cameroon

Mauritania

CapeVerde

Congo,Rep.

Madagascar

SouthAfrica

SierraLeone

Gambia,The

Coted'Ivoire

Burkina Faso

Mozambique

Guinea-Bissau

Congo,Dem. Rep.

SaoTome and Principe CentralAfrican Republic

Average Southern Africa & Lusophone English Speaking/ Former British Former French/ Colonies & Median Countries Colonies

Sickness and Maternity Family Allowances Work Injury Old Age Dis & Survivorship

Source: Social Security Programs throughout the World: Africa 2013. …uncertain indexation & vesting periods can discourage participation of some workers … Indexation Vesting periods Contributory Pension Indexation Angola NA Benin Discretionary 25 Botswana 1/ Burkina Faso Discretionary (acc to , & resources of the scheme) Discretionary (according to changes in the cost of living, depending on the financial resources of the Burundi system) Cameroon No explicit indexation Cape Verde Ad-hoc 20 Central African Republic No explicit indexation Chad Discretionary (by decree according to actuarial projections by the National Social Fund) Congo, Dem. Rep. Discretionary Congo, Rep. Price

Cote d'Ivoire Price (and according to changes in the cost of living, depending on the financial resources of the system) 15 Ethiopia NA Gambia, The 2/ Ghana Wage indexation Guinea Wage, depending on the financial resources of the system Guinea-Bissau NA Kenya 2/ 10 Lesotho 1/ Liberia NA Madagascar According to increases in the legal minimum wage Malawi 4/ Benefits are indexed (adjusted) by decree according to changes in the average and the legal Mali minimum wage, depending on the financial resources of the system. 5 Mauritania Price, depending on the financial resources of the National Social Security Fund Mauritius NA Mozambique NA Namibia 1/ Niger 3/ Nigeria 4/ Rwanda Ad hoc on the basis of Presidential Decree 0

Sao Tome and Principe Wages

Mali Togo

Senegal 3/ Chad

Niger

Benin

Kenya

Sudan

Ghana

Gabon

Liberia

Angola

Guinea

Nigeria Zambia

Periodically according to revisions in the regulations which specify the benefit scales and benefit Malawi

Gambia

Senegal

Burundi

Rwanda Ethiopia

Seychelles adjustments Tanzania

Seychelles

Cameroon

Zimbabwe

Mauritania

CapeVerde

Congo, Rep. Madagascar

Sierra Leone Wages, depending upon the financial position of NASSIT Sierra Leone

Cote d'Ivoire

Burkina Faso Mozambique

South Africa 1/ Guinea-Bissau

South Sudan 1/

Congo, Dem. Rep. Equatorial Guinea Sudan NA

Swaziland 2/ Sao Tomeand Principe

Tanzania Discretionary, according to the recommendation of the Central African Republic Togo Price Uganda 2/ Zambia Wages Zimbabwe No explicit indexation

1/ No national scheme 2/ Provident Fund. 3/ Points scheme. 4/ Defined-contribution scheme Source: Pension Programs throughout the World, Africa, 2013; and Bank estimates. Sustainability

23 Mapping contribution rates against full replacement rates suggests that some countries may face sustainability challenges

Contribution Rates and Calculated Replacement Rates for Defined-Benefit Schemes

30.0%

Sudan 25.0%

Tanzania Mali 20.0%

Togo Ghana Sierra Leone 15.0% Ethiopia Cote d'Ivoire Guinea Rep. of Congo Burkina Faso Angola

Old Age Contribution Rate Contribution Age Old Madagascar Sao Tome & Principe 10.0% Zambia Burundi Mauritania Chad Zimbabwe Moz. Cameroon Central African Republic Liberia Rwanda

5.0%

Seychelles

0.0% 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00% 90.00% 100.00% Calculated Replacement Rate (after 30 years) Source: Social Security Programs throughout the World, Africa: 2013 and World Bank estimates. … and some countries have projected unsustainable fiscal burdens over the medium-term

Tanzania Financing Gap Projections: 2010

Tanzania: Pension Financing Gaps

0.8% The Gambia: Projected Expenditures for the 0.7% Public Service 0.6%

0.5%

0.4%

0.3%

0.2%

0.1%

0.0%

2006 2011 2016 2021 2026 2031 2036 2041 2046 2051 2056 2061 2066 2071 price indexation no indexation Pension spending generally low compared to regional benchmarks yet understandable when considering dependency and coverage rates Pension Spending (% of GDP, % of Government Expenditure – late 2000s)

Liberia (2010) 0.1%0.4% Ethiopia (2006) 0.3% 1.7% Eritrea (2001) 0.3% 1.0% Uganda (2011) 0.4% 2.0% Congo, Dem. Rep. (2005) 0.4% 2.1% Swaziland (2010) 0.4% 1.2% The Gambia (2006/2003) 0.5% 1.7% Sierra Leone (2009) 0.5% 2.5% Spending as a % of Government Expenditure Cameroon (2009) 0.5% 2.3% Mauritania (2007) 0.6% Niger (2006) 0.7% 2.9% Spending as a % of GDP Cote d'Ivoire (2006) 0.7% 2.9% Rwanda (2005) 0.8% 2.8% Central African Republic (2004) 0.8% 4.8% Burundi (2010) 0.9% 2.5% Burkina Faso (2009) 0.9% 3.5% Nigeria (2004) 0.9% 3.5% Zimbabwe (2011) 1.0% 3.5% Congo, Rep. 1.0% 3.0% Ghana (2010) 1.3% 4.6% Kenya (2010) 1.3% 4.5% Malawi (2012) 1.4% 3.3% Zambia (2008/2012) 1.4% 5.3% Benin (2008/2010) 1.4% 6.5% Mali (2010) 1.6% 6.8% Botswana (2009) 1.7% 4.8% Senegal (2010) 1.8% 6.3% Mozambique (2010) 1.8% 5.2% Tanzania (2010) 1.9% 7.0% Seychelles (2011) 1.9% 5.4% Lesotho (2009) 2.0% 3.3% Guinea-Bissau (2005) 2.1% 10.6% South Africa (2010) 2.2% 6.7% Togo (2010) 2.3% 9.3% Namibia (2011) 3.2% 9.1% Cape Verde (2013/2010) 4.4% 13.0% Mauritius (2011) 5.0%

World 3.3% Middle East 3.3% North America 6.6% Latin America and the Caribbean 4.6% 13.6% Central and Eastern Europe 8.3% Western Europe 11.1% Asia and the Pacific 2.0% Sub-saharan Africa 1.1% 3.6% North Africa 5.0% Africa 1.3% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0%

Source: ILO, World Bank estimates, IMF World Economic Outlook Database, 2014. And the fiscal envelope is modest compared to other benchmarks Central Government Expenditures, Revenues and Gross Annual average, 2010-2014, % of GDP) 33 Sub-Saharan Africa 29 25 Middle East and North Africa 32 50 Latin America and the Caribbean 34 36 Emerging market and dev. economies 30 Advanced economies 42 Central Government Gross Debt

Madagascar 13 41 Central African Republic 17 24 Ethiopia 18 23 DRC 19 39 Sierra Leone 19 Central Government Revenues 31 Uganda 20 56 Guinea-Bissau 20 16 Cameroon 21 30 Benin 22 28 Central Government Expenditures Chad 22 30 Mali 23 33 Niger 24 60 Côte d'Ivoire 24 35 Comoros 24 53 Mauritius 25 45 Togo 25 30 Burkina Faso 26 18 Nigeria 26 58 Guinea 26 31 Zambia 27 77 The Gambia 27 40 Tanzania 27 20 Gabon 27 26 Rwanda 27 56 Zimbabwe 28 54 Ghana 28 43 Senegal 28 52 Kenya 30 8 31 31 Liberia 31

Eritrea 32 42 South Africa 33 31 Republic of Congo 33 88 Cabo Verde 34 19 Swaziland 35 70 Seychelles 35 44 Mozambique 35 23 Namibia 35 35 Burundi 35 17 Botswana 35 32 Angola 40 50 Malawi 41 9 Equatorial Guinea 42 80 São Tomé and Príncipe 44 38 Lesotho 60 - 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 percent of GDP

Source: IMF: World Economic Outlook Database, March 2014. Efficiency can exact a high cost

Administrative Expense Indicators (US$ or % of Benefits/Expenditures) $400.0 200.0%

180.0% $350.0

160.0% $300.0 140.0%

$250.0 120.0%

$200.0 100.0%

US$ US$ percent 80.0% $150.0

60.0% $100.0 40.0%

$50.0 20.0%

$0.0 0.0% x x x x x x x Botswana- Namibia- Swaziland- South Uganda- Tanzania- Burkina Ghana- Kenya- Tanzania- Sierra Rwanda- Kenya- Mauritius- POPE GIPF PSPF Africa- NSSF PPF Faso-CNSS SSNIT NSSF GEPF Leone- RSSB CSPS MNPS GEPF NASSIT

Administrative Expense per Insurance Benefit- US$ - left axis Administrative Expense as % of Benefits percent right axis Administrative Expense as % of Revenues percent right axis Source: Oleksiy Sluchynsky, Defining, Measuring and Benchmarking Administrative Expenditures of Public Pension Programs. Draft mimeo, 2012. Note: An “x” above the scheme indicates that the actual costs of operation are more than 5 times the predicted levels based on the averages observed for 100 pension and social security programs throughout the world. What are the costs of various social pension benefits? Cost Estimates for Elderly Assistance Schemes (% of GDP) 2.0% 30.0% Cost of a benefit of 20% of GDP/capita for all age 65+ 28% 1.8% Government Expense (right hand axis) 26% 25.0% 1.6% Universal Benefit of $1.25 per day for all 65+ 22% 22% 22% Cost of a Benefit based on Poverty Headcount at $1.25/day for all 20% 1.4% 20% 20% population under $1.25/day and over age 65 20% 20% 19% 20.0% 19%

18% % ofGDP% 1.2% 17% - 17% 15% 15% 15% 14% 1.0% 14% 14% 15.0% 14% 14% 12%

% ofGDP% 12% 0.8% 11% 11% 10% 10% 10% 10.0% 9% 8% 0.6% 8% 8% 8% 8% 7% 8% 8% Expenditure Government

0.4% 5.0%

3% 0.2%

0%

0.0% 0.0%

Mali

Togo

Chad

Niger

Benin

Kenya

Sudan

Ghana

Liberia

Angola

Guinea

Nigeria

Zambia

Malawi

Uganda

Senegal

Burundi Lesotho

Rwanda

Ethiopia

Namibia

Tanzania

Mauritius

Botswana

Swaziland

Seychelles

Cameroon Zimbabwe

Mauritania

Cabo Verde Cabo

Congo, Rep. Congo,

Madagascar

South Africa South

Sierra Leone Sierra

Gambia, The Gambia,

Cote d'Ivoire Cote

Burkina Faso Burkina

Mozambique

Guinea-Bissau

Central African… Central Congo, Dem. Rep. Dem. Congo,

Sao Tome and Principe and Tome Sao Sources: World Development Indicators, accessed 3/2015. Note: demographic data is from 2013; GDP data, government expense data, poverty gap data from 2008-2013 as applicable. What contributes to potentially growing fiscal costs? • National schemes – maturing • Early in demographic transition, but possibly more advanced in covered workforce • Contr. rates & benefit formulas inconsistent w/long-run balances • Administrative costs • Civil servant schemes - Growth in system dependency ratios & some with inconsistent parameters. • Transition costs for civil servant schemes adopting funding. • Social pension costs increase w/growth in elderly populations & scheme expansion Reform Principles

31 Reform Principles – contributory schemes • Explore new design options – voluntary, liquid, & possibly with special subsidies for the poor to save. • Parametric reforms - choices between years of work life, contribution rates and replacement rates - actuarial projections to guide reform options.  80 11.6 16.0 16.4 70 18.4 19.1 19.1 19.4 16.1 16.1 16.3 16.3 16.6 16.6 17.2 17.3 17.4 14.3 14.8 15.0 15.1 15.3 15.3 15.4 15.4 15.5 15.5 15.5 15.7 21.8 16.9 12.3 19.7 20.4 20.9 18.5 16.8 18.2  Contribution rate 22.8 23.6 60 20.3

 Accrual rate 50

 Wage base def. 40Age  Vesting 30 20

 Minimum pension 10

 Indexation 0 • Harmonize & merge Retirement Eligibility Age at Retirement Age • civil service & national schemes (w/occupational top-up as necessary). • Strengthen regulation & supervision of occupational & individual schemes (esp. for self-employed, unemployed, informal workers). Reform Principles – non-contributory schemes • Universal support for the elderly – exclusion errors need to be weighed against fiscal costs. • Cost-benefit analysis of targeting the elderly can be weighed against targeting poor households • Matching contributions could be linked to worker savings & elderly assistance benefits. . Infrastructure needed for public transfers - identification, targeting, record-keeping, disbursement.

Cost of social pensions to eliminate poverty gap Poverty headcount by age group amongst the elderly

1.6 50.0% Poverty Headcount (%< Bottom 40%) 1.4 45.0%

1.2 40.0%

1.0 35.0%

0.8 30.0%

0.6 25.0% Cost (%Cost of GDP)

0.4 20.0%

0.2 15.0%

- 10.0%

5.0%

0.0% Ghana Tanzania Mozambique Malawi Mauritius Zambia Rwanda Women Men Working Age Adults (25-59) Children (0-14) Youth (15-24) Elderly (60+) Questions for Discussion

34 Closing the coverage gap • Should a core focus of social security be oriented towards increasing the coverage of elderly poverty protection? • What contributory designs and non-contributory support offer the strongest potential for scalability? Focusing on the poorest • Should cash transfers target the poorest, including elderly in poor households? • Alternatively, should universal support for the elderly be offered to avoid exclusion errors and labor market effects (or cases with a legacy schemes)? Aligning pensions to needs and enabling conditions • Should payroll-based PAYG DB schemes in SSA depart from the scaled- premium approach adopting lower benefit levels where needed consistent with affordable long-term contributions and sustainable balances? • Where in the region might the risks of pre-funding outweigh the benefits due to insufficient enabling conditions (incl. fiscal capacity to support transition costs, regulatory & institutional infrastructure)? • What are some of the tradeoffs involved in coordinating or merging civil service and national schemes?