Though not yet universal, income security for older people is the social protection benefit with the largest effective coverage rate. Globally, it is estimated that 77.5% of the aged population has access to some form of old-age pension, however, there are still big differences between regions, rural and urban areas and between women and men.
Old-age pension systems are often composed of a mix of contributory and non-contributory schemes, which aim to provide income security for the elderly. Over the last decades, non-contributory systems, financed through taxation, have made it possible to extend coverage significantly in countries with high levels of informality, mainly to traditionally unprotected groups, such as the self-employed, women, migrants, etc. A wide variety of countries have contributed to this effort to increase coverage by implementing universal pension systems, including many low- and lower middle-income countries.
The challenges vary substantially across regions and even across countries in the same region. Countries that have comprehensive and mature old-age pension systems face the challenge of making them financially sustainable in the medium and long term, while providing sufficient and adequate benefits, in a demographic transition in which pensioners are growing faster than the contributory population. At the other extreme, countries are struggling to extend coverage and finance their pension systems, while facing structural barriers of low economic growth, high levels of informality, low contributory capacity, poverty and insufficient fiscal space.
Approach and Technical Support
The ILO promotes a rights-based approach to the protection of older persons. This rights-based approach is based on international human rights and social security standards, which represent a global consensus guiding the development of social protection systems.
The ILO provides a range of services in the area of old-age pensions, in line with the international standards adopted by its members in this field. (see standards)
The ILO is also expected to increase technical support to pension systems, and in particular old-age pensions, in the face of the challenges they face currently and in the future, including, inter alia, demographic transition, economic cycles and the growth of informal work. The aim is to maintain the sustainability of such schemes, but at the same time to support institutions in adopting policies that are within the framework of the principles and minimum standards set out in international social security standards.
The ILO provides technical support to Member States through the process of formulation, development, implementation and evaluation of social protection policies in the area of pensions. To achieve this, the ILO has a series of quantitative tools that form part of the Quantitative Platform on Social Security (QPSS), including the ILO/PENSIONS actuarial model, which aims to assess the expected financial impact of the introduction of changes to pension systems, especially old-age pensions. The main objective of this tool is to support the design and costing of pension reforms.
A critical issue for the ILO is that actuarial work and its linkage to policy design should be framed within international social security standards as well as comparative best practices. The ILO Social Security (Minimum Standards) Convention, 1952 (No. 102), which served as the blueprint for the development of social security worldwide, states that the periodic realization of actuarial studies and calculations is the main way the State can assume its general responsibility for the due provision of social security benefits. In particular, Article 71.3 of Convention No. 102 states that: “The Member shall accept general responsibility for the due provision of the benefits provided in compliance with this Convention, and shall take all measures required for this purpose; it shall ensure, where appropriate, that the necessary actuarial studies and calculations concerning financial equilibrium are made periodically and, in any event, prior to any change in benefits, the rate of insurance contributions, or the taxes allocated to covering the contingencies in question.” In this context, the technical assistance provided by the ILO at the country level will be informed by the guiding principles embedded in international ILO standards, with an emphasis on the design of sustainable and universal pension systems, based on collective financing, combining contributory and non-contributory components, and ensuring predictable benefits guaranteed by law.
According to the ISSA-ILO Actuarial Guidelines, actuarial work should be adequately linked to national and institutional needs to undertake reforms and improve systems, both in the design of the schemes and managing institutions and in the building of institutional capacities. Based on its experience of several decades, the ILO developed an intervention model for the actuarial field that covers three main processes: national or institutional diagnostic, capacity building and technical support.