Why social pensions? Achieving income security for all in older age About HelpAge HelpAge International is a global network of organisations promoting the right of all older people Any parts of this publication may be repro- to lead dignified, healthy and secure lives. duced without permission for non-profit and Why social pensions? educational purposes. Achieving income security for all in older age Published by HelpAge International Please clearly credit HelpAge International and send us a copy or link. Written by Florian Juergens ([email protected]) and Dr Flavia Galvani ([email protected]) The authors would like to express their gratitude to Nicholas Barr, Charles Knox-Vydmanov, Luis Frota, Gibrán Cruz-Martínez, Usa Khiewrord, Peter Morrison and Tapiwa Huye for their review and invaluable contributions to this brief. www.helpage.org Registered charity no. 288180 @HelpAge HelpAge International Copyright © HelpAge International 2020 This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License, https://creativecommons.org/licenses/by-nc/4.0 Front page photo © Hereward Holland/ Age International Female Daw Mu Nge, 63, Myanmar 2 Table of Contents 1 Introduction ................................................................................................................................................................... 3 2 Social protection throughout the life-course ............................................................................................................... 3 3 Economic and social challenges in older age ............................................................................................................. 5 4 Pension systems ensure social protection in older age .............................................................................................. 7 5 chieving income security for all older people through universal social pensions ................................................... 10 6 Impacts of social pensions ........................................................................................................................................... 13 7 The affordability of universal social pensions ............................................................................................................ 17 8 References ..................................................................................................................................................................... 18 1 Introduction This paper aims to present a concise yet comprehensive The paper starts with an introduction of the concept argument for the importance of old age social pensions of social protection, followed by a short discussion of as an effective, efficient and affordable policy to achieve common socioeconomic challenges faced by many older income security, and reduce poverty and inequality in people which provide a fundamental justification for older age. social protection in older age. Section four presents a discussion of the objectives and components of pension It makes the case for social pensions by drawing on systems, followed by an analysis of the crucial role of international human rights principles and standards, universal social pensions in providing basic income decades of global experience in the design and security within comprehensive pension systems. Section implementation of pension systems, as well as evidence six presents some of the impacts of social pensions emerging from a wide range of lower and middle-income on recipients, their households and communities. The countries implementing social pensions. paper concludes with considerations on financing and affordability of social pensions. 2 Social protection throughout the life-course Every person, male or female, young or old, rich or benefit, maternity benefit, invalidity benefit, survivors’ poor, faces a variety of circumstances throughout their benefit - relate to these risks.1 life-course that hold the potential to negatively impact The human right to appropriate social security their health, psychosocial wellbeing, livelihoods and the and social protection throughout the life-course ability to achieve and maintain an adequate standard of is well- established in international human rights living. law (Box 2). However, there are different views on the Although each individual’s life-course is unique, objectives and scope of social protection, which have there are stages or circumstances in a person’s implications for how the right to social protection is life which are universally recognized to heighten implemented in practice. the risks to one’s wellbeing, including childhood, There are a variety of approaches to social protection orphanhood, parenthood, disability, sickness or ranging from more narrow ones which focus on injury, unemployment, widowhood and old age. The addressing the challenges faced by today’s poor and interventions developed in response to these risks reducing existing poverty (safety net approach), to are known as social security. Indeed, the nine approaches that see the role of social protection as not classical branches of social security which constitute the only reducing today’s existing poverty but protecting foundations of comprehensive social protection systems everyone against universal risks that might lead to - medical care, sickness benefit, unemployment benefit, poverty and multiple forms of deprivation (life-cycle old-age benefit, employment injury benefit, family approach). 3 For HelpAge, social protection is an effective it can make in increasing people’s dignity and self- mechanism to reduce existing poverty, deprivation esteem, inclusion and social participation, as well as and marginalization, including amongst older active citizenship and empowerment. people, but its real potential lies in its capacity to provide protection against shocks and stresses that In this sense, HelpAge defines social protection as everyone faces throughout their lives, thus ensuring the system of public policies and programmes aimed that people do not become destitute in the first place. at preventing or protecting all people against poverty, vulnerability, and social exclusion throughout their life HelpAge further believes in the transformative power of courses. social protection, recognizing the crucial contributions BOX 1 Approaches to social protection The safety net approach is based on the idea disability, old age, raising a family, unemployment) that limited resources should be directed to those then this will prevent them from falling into poverty identified as the poorest and most vulnerable in in the first place. A key distinction is that such an society to address their economic needs, while approach defines universal risks that all people may benefits or services provided on a universal basis, face at some point in their lives, rather than seeing including to the those identified as “non-poor” social protection as something relevant to a small would be considered inefficient. This is a model portion of a country’s population. often advocated for by institutions such as the World This approach is championed by the United Nations, Bank and the International Monetary Fund (IMF). in particular the ILO, and other rights-based It can also be called the “poor relief”, “charity” or organizations. Figure 1 illustrates the life-cycle “ poverty-targeted approach”. approach to social protection, showing the different The life-cycle approach focuses less on targeting kinds of social protection benefits that may be “the poor” and is instead based around the logic that relevant for risks faced at different stages of the life- if people are protected from life cycle risks (such as course. Figure 1 The life-cycle approach to social protection Maternal and child grants Pre-natal and Support to orphans and early childhood vulnerable children Disability Older Age School Age Residual social assistence Old age pensions Support to education Widows pensions Working Age Adolescence Unemployment insurance Active labour market policies Source: Kidd (2017)2 4 3 Economic and social challenges in older age 3. Economic and social challenges in older age Growing older is often associated with increasing estimates, over 40 percent of older men and around 15 Growing challenges older to earning is often an adequate associated income with to maintain increasing challengespercent of older to women earning (65+) an in adequatelow- and middle-income income to “Inequalities maintainan acceptable an acceptalestandard of living, standard while expenditure, of living , while ependiturecountries participated especially in the labour on healthcare force in 2017., often accrue and get increaseespeciallys. on healthcare, often increases. reinforced over a person’s life. WWorkork in in older age age Global evidence shows that although a significant hey come home “Inequalities accrue and get reinforced over a to roost in later Globalproportion evidence of people remainshows economically that although active a significant person’s life. pr Theyopor cometion home of to roostpeople in later remain years, economicallyin older age, especially active inin lower- older and middle-incomeage, especially inoften lower exacerbating- and eachmiddle other-income and causing countries greater . years often onethelesscountries. Nonetheless,, participation participation in the in laour the labour force force declines disadvantage.” maredly in older age. s shown in Figure eacerating each declines markedly