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Developments in Public Old-Age Benefit Schemes in the Asia and Pacific Region

Developments in Public Old-Age Benefit Schemes in the Asia and Pacific Region. Maribel D. Ortiz Director Regional Office for Asia and the Pacific International Social Security Association. Goals of a public pension system. For the individual: - income security in old age

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Developments in Public Old-Age Benefit Schemes in the Asia and Pacific Region

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  1. Developments in Public Old-Age Benefit Schemesin the Asia and Pacific Region Maribel D. Ortiz Director Regional Office for Asia and the Pacific International Social Security Association

  2. Goals of a public pension system • For the individual: - income security in old age • For the country: - social justice - income redistribution - prevention/alleviation of poverty - growth and economic development

  3. Goals of a public pension system Coverage that is • Adequate • Affordable • Sustainable

  4. Financing pressures on pension systems • Short-term - high benefits vis-à-vis contributions - low return on investments - high operating costs • Long-term - population ageing

  5. Population Pyramid of Eastern Asia

  6. Population Pyramid of So. Eastern Asia

  7. Population Pyramid of Oceania

  8. Population Pyramid of Western Asia

  9. Bahrain Fiji India Iran Japan Jordan Korea Malaysia Nepal New Zealand Pakistan Palestine Philippines Qatar Samoa Saudi Arabia Sri Lanka Syria Thailand Turkey United Arab Emirates Yemen ISSA member-countries in the survey* *ISSA Survey on “Developments in Public Old-Age Pension Schemes”, August 2005

  10. ISSA member-countries in the survey* • 15 countries with defined benefit schemes • 6 countries with provident fund schemes • 1 country with universal payg scheme *ISSA Survey on “Developments in Public Old-Age Pension Schemes”, August 2005

  11. Actuarial life of the fund* • Bahrain 2034 per 2003 valuation • Jordan 2063 per 2002 valuation • Korea 2047 per latest valuation • Palestine 2049 per 1999 valuation • Philippines 2027/2029 per 2003 valuation • Saudi Arabia 2060 per 2000 valuation • Thailand 2053 per 2002 valuation • UAE 2043 per 2001 valuation • Yemen 2029 per 2004 valuation *Based on survey response of reporting institutions in the country

  12. CONTRIBUTIONS + INVESTMENT INCOME BENEFITS + OPERATING EXPENSES Reform efforts in Asia-Pacific region Maintaining the Balance >

  13. Reform efforts in Asia-Pacific region Defined benefit schemes • Increase contributions by • increasing contribution rate • increasing covered salaries • counterpart government contributions • improving compliance • extending coverage • improving payment facilities

  14. Defined benefit schemes Reform efforts in Asia-Pacific region • Bahrain 18% 21% • Japan 17.35% 32% • Korea 9.0% 15.9% • Philippines 8.0% 16-22% • Saudi Arabia 18% 26% • Turkey 20% 25% • UAE 20% 25% • Yemen 12% 20% • Iran 30%

  15. CONTRIBUTIONS + INVESTMENT INCOME BENEFITS + OPERATING EXPENSES Reform efforts in Asia-Pacific region Maintaining the Balance >

  16. Reform efforts in Asia-Pacific region Defined benefit schemes • Increase investment income by - diversification of portfolio - improving governance - separating investment management from fund administration

  17. CONTRIBUTIONS + INVESTMENT INCOME BENEFITS + OPERATING EXPENSES Reform efforts in Asia-Pacific region Maintaining the Balance >

  18. Reform efforts in Asia-Pacific region Defined benefit schemes • Decrease benefits by - tighter eligibility conditions for early and normal retirement a. Increase retirement age b. Increase in vesting period - change/removal of automatic indexation - tighter actuarial reduction/accrual factors - longer income basis for pension - verification of pensioner status - legislation

  19. Reform efforts in Asia-Pacific region Defined benefit schemes • Institutional measures - incremental legislation for coverage - portability of benefits - merger of separate schemes - greater use of Information and Communication Technology (ICT) - reduce operating expenses

  20. CONTRIBUTIONS + INVESTMENT INCOME BENEFITS + OPERATING EXPENSES Reform efforts in Asia-Pacific region Maintaining the Balance >

  21. Provident funds Reform efforts in Asia-Pacific region • Contributions - improve compliance, extend coverage • Investment diversification, governance - declining interest rates - employ of investment consultant • Benefits - lump-sum vs pension vs combination - reduction in applied interest rate • Introduction of new scheme • Greater use of ICT

  22. Reform efforts in Asia-Pacific region Universal pay-as-you-go schemes • Australia and New Zealand both have universal social security programmes • Goal of current reform efforts: to improve match between social security support vis-à-vis improving social and economic participation • Creation in 2001 of New Zealand SuperAnnuation Fund

  23. The way forward The challenge of ageing • Defining the goals of pension reform • Cognizance of trade-offs • Anticipating the future

  24. Thank you

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