Pensions & Aging

The most dramatic aging worldwide is projected to take place in low and middle-income countries. This may result in inadequate income support for the elderly, persons with disabilities and survivors.

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 proved to be the most effective tool to provide income support to the poor elderly people 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 Carribean has expanded the options to cover informal workers as well as self-employed and platform workers.

Last Updated: Apr 03, 2023

The World Bank Group helps governments analyze, design and reform pensions and social insurance policies. These are aimed to make pensions systems improve coverage of those in need, build fiscal sustainability of the programs, and provide adequate support to prevent vulnerable groups from sinking into poverty, all of which prominently feature in the most recent update to the World Bank strategy for social protection.  In addition, the aging agenda of Social Protection has broadened to promote the extension of working careers and to provide long term care, in response to the needs of aging populations.

Globally, more than two-thirds of government spending is on social services on old age, disability, and survivor pensions.  These large and growing programs face several challenges in the context of population aging which the World Bank addresses in its discussions with governments:

• Coverage: only one in three workers contributes to a pension scheme globally and the figure falls to one in ten in low-income countries, but the extension of non-contributory and social programs has produced important progress in several countries.
• Sustainability: most public pension schemes are not viable financially and cannot therefore keep their promises to younger cohorts that will retire in the future.
• Adequacy: due to fiscal constraints, the expansion of social and other forms of non-contributory pensions has happened at the expense of an adequate level of pensions; at minimum, social pensions should cover poverty gaps, but also provide sufficient resources for the health needs of the elderly and persons with disabilities.
• Efficiency: the costs in many private pension systems remain stubbornly high despite well-developed solutions to cut costs across the value chain and pension fund assets are not always invested in productive, long-term assets.
• Security: where there are assets to invest these need to be securely governed, invested, and supervised and individuals need to have unique IDs so that their contributions and claims can be tracked and paid, to ensure pension promises can be paid out over the decades.
• Support to productive inclusion of older workers: aging population need to extend their working lives to adapt to the changing demographics.  Keeping workers productive and employable until a higher age also requires skills programs targeted to older workers.
• Long term care: In addition, long term care costs can severely reduce the ability of elderly individuals, persons with disabilities, and their households to cope with illness or poor nutrition and place a significant financial burden on elderly individuals.

Last Updated: Apr 03, 2023

The World Bank has around 50 active projects across the globe. These engagements include lending components in Development Policy Loans (DPLs) in support of major reforms, investment loans to improve administration and a wide range of Analytical and Advisory Services (ASA) which include analytical tools such as the Pension Reform Options Simulation Toolkit (PROST), APEX – a Stata-based micro-simulation model, the Pension Reform Options Micro Simulation (PROMiS), the recently developed Social Insurance Administrative Diagnosis tool (SIAD), and the Pension Index.  Reimbursable Advisory Activities (RAS) are extended in the Middle East and North Africa, as well as the Europe and Central Asia Regions.

In addition to capturing performance data on non-contributory social pensions, the World Bank’s ASPIRE database has been expanded to include administrative data on design and performance statistics for over 150 government mandated contributory pension programs.

Last Updated: Apr 03, 2023