Chomik, Ra al; O'Kee e, Philip; Piggo , John
Wo king Pape
Pensions in aging Asia and he Paci ic: Policy insigh s and
p io i ies
ADB Economics Wo king Pape Se ies, No. 746
P o ided in Coope a ion wi h:
Asian De elopmen Bank (ADB), Manila
Sugges ed Ci a ion: Chomik, Ra al; O'Kee e, Philip; Piggo , John (2024) : Pensions in aging Asia and
he Paci ic: Policy insigh s and p io i ies, ADB Economics Wo king Pape Se ies, No. 746, Asian
De elopmen Bank (ADB), Manila,
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ADB ECONOMICS
WORKING PAPER SERIES
NO. 746
Oc obe 2024
Pensions in Aging Asia and he Paci ic
Policy Insigh s and P io i ies
Pension sys ems ac oss Asia and he Paci ic ace common challenges o low con ibu o y co e age,
inadequa e social pensions, and ailu e o include he in o mal sec o . They also exhibi gende inequi ies,
a lack o policy lexibili y and a en ion o labo incen i es, and unde de eloped go e nance. This pape
e iews he s uc u e and pe o mance o egional pension sys ems, and makes p oposals o an expanded
ole o social pensions wi h inclusi e a ge ing, e o med con ibu o y schemes, inno a ions o he in o mal
sec o and women, and enhanced eliance on echnology.
Abou he Asian De elopmen Bank
ADB is commi ed o achie ing a p ospe ous, inclusi e, esilien , and sus ainable Asia and he Paci ic,
while sus aining i s e o s o e adica e ex eme po e y. Es ablished in 1966, i is owned by 69 membe s
—49 om he egion. I s main ins umen s o helping i s de eloping membe coun ies a e policy dialogue,
loans, equi y in es men s, gua an ees, g an s, and echnical assis ance. PENSIONS IN AGING
ASIA AND THE PACIFIC
POLICY INSIGHTS AND PRIORITIES
Ra al Chomik, Philip O’Kee e, and John Piggo
ASIAN DEVELOPMENT BANK
The ADB Economics Wo king Pape Se ies
p esen s esea ch in p og ess o elici commen s
and encou age deba e on de elopmen issues
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e lec he iews and policies o ADB o
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ADB Economics Wo king Pape Se ies
Ra al Chomik, Philip O’Kee e, and John Piggo
No. 746 | Oc obe 2024
Ra al Chomik ( [email protected]) is a senio
esea ch ellow; Philip O’Kee e (pokee [email protected])
is p o esso and di ec o o he Ageing Asia Resea ch
Hub; and John Piggo (j.piggo @unsw.edu.au)
is p o esso and di ec o o he Aus alian Resea ch
Council Cen e o Excellence in Popula ion Ageing
Resea ch a he Uni e si y o New Sou h Wales.
Pensions in Aging Asia and he Paci ic:
Policy Insigh s and P io i ies
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ABSTRACT
Asia and he Paci ic has he mos di e se egional pension landscape globally. Ye he egion’s
pension sys ems a e acing common challenges as hey a emp o expand co e age, and ensu e
adequacy and ai ness, while main aining iscal sus ainabili y. We e iew he s uc u es and
pe o mance o pension sys ems ac oss Asia and he Paci ic. Mos emain cha ac e ized by low
con ibu o y co e age, social pensions wi h inadequa e bene i s and o en low (o no) co e age, and
in o mal sec o schemes wi h modes ac ion o da e. They a e also cha ac e ized by gende
inequi ies, lack o policy lexibili y and a en ion o labo incen i es, and unde de eloped go e nance
s uc u es. The pape makes p oposals o add essing hese challenges h ough an expanded ole o
social pensions wi h inclusi e a ge ing, e o med con ibu o y schemes, ongoing inno a ions o he
in o mal sec o and women, and enhanced eliance on echnology.
Keywo ds: pension, Asian pension, social p o ec ion in Asia, means es ed pension
JEL codes: H55, N35, J18
_______________________
This pape was p epa ed as a backg ound inpu o he ADB Asian De elopmen Policy epo , Aging Well in Asia. The
au ho s a e g a e ul o Aiko Kikkawa, Donghyun Pa k, and Albe Pa k om he ADB Chie Economis ’s O ice o
guidance and commen s on an ea lie d a , as well as P o esso Thanh Long Giang om he Na ional Economics
Uni e si y o Hanoi and pa icipan s in an ADB semina in Augus 2024. In addi ion, commen s and insigh s we e
ecei ed om Himanshi Jain, Robe Palacios, Dewen Wang, and Ilsa Medeina. The au ho s acknowledge inancial
suppo o he wo k om ADB and CEPAR. The g an und o his s udy was ecei ed om he Japan Fund o
P ospe ous and Resilien Asia and he Paci ic inanced by he Go e nmen o Japan h ough he Asian De elopmen
Bank.
Co espondence: Ra al Chomik ( [email protected]).
I. INTRODUCTION: A CONSTELLATION OF CHALLENGES
Asian economies a e among he wo ld’s mos apidly aging. The People’s Republic o China (PRC),
Indonesia, Thailand, and Vie Nam a e expec ed o ha e he same o al popula ion in 30 yea s as now: 1.9
billion. Bu hei popula ion aged 65+ is p ojec ed o almos double om 250 million o 485 million. In Sou h
Asia, Bangladesh, India, and Pakis an a e expec ed o add a ound 180 million olde people in he same
pe iod. In he Caucasus, A menia and Aze baijan a e aging as e han some economies o he
O ganisa ion o Economic Co-ope a ion and De elopmen (OECD) (Figu e 1). By 2050, all 33 eme ging
economies in Asia and he Paci ic ha a e ea u ed in his epo will be olde ; 13 will be “aged” socie ies
(mo e han 14% o he popula ion aged 65+); and 6 “supe -aged” (mo e han 20% o he popula ion aged
65+).
These aging ends ha e economic, social, and iscal implica ions. How will pension sys ems in he
egion p o ec hese expanding coho s o olde people? Designing adequa e, sus ainable, and
comp ehensi e pension sys ems aces a ious challenges. Indeed, he e is a cons ella ion o
in e connec ed challenges ha cha ac e izes many eme ging economies in he egion (Chomik and
Piggo 2015).
Fi s , aging is aking place a lowe le els o economic de elopmen han was he case in OECD
economies. The decline in wo king age popula ions ac oss he egion, including in he PRC, Geo gia,
Japan, he Republic o Ko ea (ROK), Thailand, S i Lanka, and Singapo e will ac as an economic
headwind and cons ain go e nmen budge s. Fo example, sh inking wo k o ces in he PRC and
Thailand a e es ima ed o esul in annualized g oss domes ic p oduc (GDP) g ow h educ ions o
mo e han 1% (Ko schy and Bloom 2023). Many economies in he egion will ge old be o e hey
become ich.
Second, he demand o compe ing public ou lays is conside able. Aging will place g ea e p essu e
on go e nmen s o no only in es in pensions, bu also in cu en ly unde unded heal h and ca e
p og ams. Fo example, inc emen al pension spending alone be ween 2015 and 2050 was p ojec ed
o inc ease by h ee pe cen age poin s and i e pe cen age poin s in se e al economies o Eas Asia
and Sou heas Asia (Wo ld Bank 2016).
Thi d, a la ge in o mal sec o limi s p oduc i i y g ow h, cons ains iscal maneu e abili y, and poses
challenges o pension design. The ypical economy in he egion has mos o i s wo k o ce employed
in in o mal se ings, and many ha e low e enue aising capaci y (e.g., Indonesia, Malaysia,
2
Myanma *, and mos Sou h Asian economies ha e some o he lowes e enue– o–GDP globally;
Figu e 1). In o mali y also poses challenges o pension sys ems wi h social insu ance elemen s, which
equi e bo h con ibu ions and good eco d keeping.
Fou h, s ong mig a ion om u al a eas o la ge u ban cen e s (and in e na ionally o some economies
such as Nepal and some Paci ic DMCs) is lea ing behind (g and)pa en s and some imes child en, which
comp omises adi ional o ms o dependen suppo and complica es social p o ec ion sys ems,
especially whe e hey equi e po abili y o pension igh s.
And i h, exis ing social p o ec ion s uc u es in much o he egion a e unde de eloped, o en lacking
good go e nance, adequa e bene i s, and/o ha ing poo co e age o he popula ion. This is he poin o
depa u e o his pape , which assesses ecen policy de elopmen s and insigh s and sugges s policy
p io i ies o imp o e pension sys ems in he eme ging economies o Asia and he Paci ic.
* E ec i e 1 Feb ua y 2021, ADB placed a empo a y hold on so e eign p ojec disbu semen s and new con ac s in
Myanma .
3
Figu e 1: Pension Con ex , Pa ame e s, and Ou comes
Demog aphy De elopmen Social Pensions Con ibu o y
Aging Le el
(65+ % o pop)
Aging Ra e
(pp chg by 2050)
Li e Expec ancy
(a 60)
Heal hy Li e Exp.
(a 60)
De elopmen
(GDP pe cap $PPP)
In o mali y
(% o employmen )
Fiscal
(Tax o GDP)
Pa icipa ion
(women 55
–64)
Pa icipa ion
(men 55
–64)
Co e age
(% o age eligible)
Co e age
(% o 60+)
Bene i Adequacy
(% o GDP pe cap)
Access Age
(w/m)
Social Pension Spend
(% o GDP)
Membe ship /
Pa icipa ion
(% o wo king age)
Access Age
(w/m)
Con ibu ions
(% o wage)
Cen al Asia and Caucuses
A menia 14% 8% 80 76 $20k 50%
23
%
72% 79% 0% 0% 12% 65 0.00% 27% 63 10%
Aze baijan 8% 11% 77 73 $19k 32% 36% 24% 11% 62/67 0.30% 25% 61 25%
Geo gia 15% 6% 79 74 $22k 56% 27% 66% 80% 100% 28% 60/65 23% 60/65 4%
Kazakhs an 8% 4% 79 75 $33k
20
%
100% 104% 6% 58/63 0.70% 80% 63 19%
Ky gyz Republic 5% 4% 80 76 $6k 63% 37% 55% 77% 16% 58/63 35% 58 25%
Tajikis an 4% 4% 76 73 $5k 28% 29% 65% 29% 24% 12% 60/65 0.10% 21% 58 25%
Uzbekis an 5% 6% 79 75 31% 15% 49% 0% 0% 30% 55/60 0.00% 86% 55/60 15%
Eas Asia
Hong Kong, China 21% 19% $73k
14%
48% 71% 20% 14% 5% 65 0.10% 52% 65 10%
Republic o Ko ea 18% 21% 86 80 $57k 27% 27% 61% 82% 70% 50% 4% 65 0.20% 54% 62 9%
Mongolia 5% 9% 76 73 $15k 44% 34% 32% 51% 2% 1% 19% 55/60 0.00% 47% 55/60 25%
PRC 14% 16% 81 76 $23k
54
%
26% 71% 71% 2% 60 0.30% 37% 55/60 24%
Sou h Asia
Bangladesh 6% 9% 81 76 $9k 95% 9% 26% 85% 35% 30% 5% 62/65 0.10% 2%
India 7% 8% 79 73 $9k 89% 19% 29% 79% 24% 2% 60 0.00% 15% 58 16%
Nepal 6% 5% 78 73 $5k 82%
18
%
19% 44% 80% 31% 31% 70 0.70% 2.50% 58 20%
Pakis an 4% 2% 77 73 $7k 84% 12% 15% 72% 7% 55/60 6%
S i Lanka 12% 10% 81 75 $14k 67% 8% 31% 76% 33% 13% 4% 70 18% 50/55 20%
Sou heas Asia
Cambodia 6% 7% 78 73 $6k 89% 24% 67% 86% 2% 60 4%
Indonesia 7% 8% 78 73 $16k 80% 15% 57% 85% 0% 0% 6% 70 0.00% 17% 65 6%
Lao PDR 5% 6% 78 73 $10k 90%
10
%
51% 71% 1% 55/60 11%
Malaysia 8% 10% 80 75 $37k 39% 19% 33% 69% 4% 5% 11% 60 0.05% 42% 55 24%
Con inued on he nex page
4
Demog aphy De elopmen Social Pensions Con ibu o y
Aging Le el
(65+ % o pop)
Aging Ra e
(pp chg by 2050)
Li e Expec ancy
(a 60)
Heal hy Li e Exp.
(a 60)
De elopmen
(GDP pe cap $PPP)
In o mali y
(% o employmen )
Fiscal
(Tax o GDP)
Pa icipa ion
(women 55
–64)
Pa icipa ion
(men 55
–64)
Co e age
(% o age eligible)
Co e age
(% o 60+)
Bene i Adequacy
(% o GDP pe cap)
Access Age
(w/m)
Social Pension Spend
(% o GDP)
Membe ship /
Pa icipa ion
(% o wo king age)
Access Age
(w/m)
Con ibu ions
(% o wage)
Myanma 7% 7% 78 74 $5k 81% 13% 31% 78% 100% 1% 7% 85 0.00% 60 6%
Philippines 6% 5% 78 73 $11k 38% 20% 49% 72% 44% 4% 60 0.40% 35% 65 14%
Singapo e 16% 18% 86 80 $133k
12%
62% 84% 48% 65 37%
Thailand 16% 16% 84 78 $22k 65% 20% 59% 80% 86% 4% 60 0.40% 29% 55 7%
Timo -Les e 5% 2% 78 73 $4k 81%
20
%
38% 57% 100% 100% 15% 60 0.50% 6%
Vie Nam 10% 10% 80 75 $14k 69% 19% 63% 78% 28% 7% 60 0.10% 30% 60/62 22%
Paci ic
Fiji 6% 4% 76 72 $17k 44% 21% 28% 68% 51% 18% 6% 65 0.10% 41% 55 18%
FSM 6% 4% 75 71 $4k 66% 44% 77% 33% 65 15%
Ki iba i 4% 4% 74 70 $2k 56% 91% 33% 48% 93% 35% 33% 67 1.20% 15% 50 15%
Ma shall Islands 5% 6% $6k 33% 66% 38% 73% 61 16%
Papua New Guinea 3% 4% 76 72 $3k 17% 2% 8% 60 0.00% 3% 55 12%
Samoa 5% 3% 78 73 $7k 51%
26%
32% 64% 93% 65% 19% 65 0.90% 25% 55 10%
Solomon Islands 3% 3% 75 72 $2k 29% 0.00% 16% 50 13%
Tonga 6% 3% 79 74 $7k 97%
25
%
41% 60% 100% 70 60 10%
Vanua u 4% 3% 76 72 $3k 72% 36% 37% 50% 0.00% 17% 55 8%
O he
economies
Aus alia 17% 7% 86 79 $65k 26% 36% 63% 75% 70% 51% 28% 67 2.60% 70% 60 12%
Japan 30% 7% 86 80 $52k 37% 70% 90% 3% 18% 65 85% 65 18%
New Zealand 17% 8% 85 79 $54k 39% 75% 85% 99% 71% 37% 65 4.50% 65 6%
Con inued on he nex page
11
has inc eased li le o e ecen decades. The e has been subs an ial expansion only in he PRC and he
ROK, and many economies ha e seen no o e y modes expansion be ween he ea ly 1990s and he
mid-2010s. In la ge pa , his e lec s he s ubbo nness o labo ma ke in o mali y in ha pe iod. In he
ace o such s ubbo nly low co e age, economies a e combining di e en app oaches o co e age
expansion (Sec ion III.B).
B. Low-Hanging F ui
The i s and possibly easies op ion o inc ease con ibu o y pension co e age is o expand co e age
among wo ke s who a e ei he al eady in he o mal sec o bu no con ibu ing o a pension scheme
o in he in o mal sec o bu in wo k a angemen s ha ha e o mal cha ac e is ics, such as an
employe -wo ke ela ionship, wi h moni o able incomes. Fo example, many sys ems in he egion
cu en ly exclude manda o y con ibu ions om he sel -employed, business owne s, o wo ke s in
en e p ises below a ce ain size. In addi ion, ou igh noncompliance in o mal sec o en e p ises may
u he educe co e age, and/o unde -decla a ion o wages o he pu poses o calcula ing
con ibu ions. This includes employe s and in e nal mig an wo ke s who nego ia e o a oid paying
pension con ibu ions by keeping cu en wages highe . Including hese a ious ca ego ies o wo ke s
and aking non-compliance o al eady included wo ke s se iously may be conside ed he “low-hanging
ui ” o he co e age expansion agenda.
Wi h he ise in digi al ansac ions and mode niza ion o con ibu ion collec ion sys ems, he
economic ac i i y o smalle en e p ises and non adi ional wo ke s becomes mo e obse able. This
allows policymake s o e isi his o ical ba ie s o wide pension con ibu ion manda es. Some
economies in Asia and he Paci ic ha e al eady done so, o en combining labo and social insu ance
law e o ms, o g adually lowe he h eshold numbe o wo ke s needed o en e p ises o equi e
con ibu ions and engage in o mal epo ing. Some egional economies ha e lowe ed he ba om
20 wo ke s o 10 wo ke s and e en 5 wo ke s, and ensu ed ha ce ain ca ego ies o wo ke s in
o mal i ms a e no excluded om pa icipa ion as a ma e o policy (e.g., in e nal mig an wo ke s).
Sel -employed wo ke s emain a challenging ca ego y, hough economies like he ROK ha e now
included hem in hei pension sys ems, and Vie Nam’s 2024 e o ms include egis e ed business
owne s in he manda e.
A g oup ha has ecei ed conside able a en ion in his ega d is con ac - o -se ice wo ke s, mos
p ominen ly in he gig o pla o m economy. This is pa o a wide deba e a ound whe he employe s
a e delibe a ely bypassing labo laws o such wo ke s despi e he employmen a angemen ha ing
many cha ac e is ics o a egula employmen ela ionship. This is a apidly e ol ing legal and
implemen a ion agenda, and one o high ele ance in Asia and he Paci ic (In e na ional Labou
12
O ganiza ion [ILO] e al. 2023). The i s s ep in he p ocess is ypically p o iding g ea e legal cla i y
on he na u e o such employmen ela ionships and whe he pla o m wo ke s a e employees o sel -
employed wo ke s. This emains a legal g ey a ea in many economies in he egion and globally.
Pending a wide esolu ion o he legal s a us o such wo ke s, some economies ha e begun o
pu sue inno a i e policy di ec ions: (i) wo king wi h pla o m companies as agg ega o s o ca alyze
olun a y pla o m wo ke pension con ibu ions (e.g., GOJEK in Indonesia; G ab in Malaysia); (ii)
using au o-en ollmen and/o au o-deduc ions wi h op -ou op ions and de eloping use - iendly
apps; o (iii) a ge ing ope a o s h ough ea ma ked axes (e.g., India's social secu i y code
an icipa es a ax on he u no e o pla o m companies o und some social secu i y co e o hei
wo ke s; ILO e al. 2023).
C. Co e ing Mig an Wo ke s
A u he g oup who a e o en excluded ei he as a ma e o policy o in p ac ice is in e na ional mig an
wo ke s. Co e ing his g oup emains an ongoing challenge in he egion. A imes, his is g ounded in
cons i u ional p o isions ha assu e social secu i y only o ci izens o he economy (e.g., Indonesia). E en
in some o he iche economies in Asia and he Paci ic, con ibu ions o o eigne s a e no manda ed (e.g.,
in Singapo e's Cen al P o iden Fund). A he same ime, p ac ice is mixed, wi h Aus alia and he
Philippines, o example, including o eign wo ke s ega dless o na ionali y. O he s include o eign wo ke s
in hei sho - e m bene i p og ams in he o mal sec o (e.g., Malaysia’s PERKESO), bu do no manda e
con ibu ions o e i emen sa ings. E en whe e o eign wo ke s, in p inciple, a e subjec o he same
manda e as na ionals (e.g., Thailand), hey a e o en a less likely o be co e ed because o he in o mal
na u e o employmen no ed abo e, o because o unila e al employe a oidance o mu ual ag eemen s o
a oid con ibu ions in o mal en e p ises. While he ela i e impo ance o nonco e age o unde -co e age
o mig an wo ke s a ies signi ican ly (bo h o sending and ecei ing economies), hei exclusion as a
ma e o policy emains a cause o conce n.
E en whe e o eign wo ke s a e manda ed o pa icipa e in pension schemes, o en he e emains a
majo issue o po abili y o en i lemen s once hey e u n o hei home economies. This equi es ha ing
bila e al social secu i y ag eemen s in place o p omo e po abili y, including o aliza ion o en i lemen s
ac oss na ional sys ems ( equen ly an issue because o mig an wo ke s ailing o mee es ing
equi emen s in one o bo h o hei home and ecei ing economies). While such ag eemen s a e a
common ea u e in OECD and Eu opean Union egimes (Holzmann and Koe l 2011, Holzmann 2018),
hey a e la gely absen in Asia and he Paci ic, and wo k is needed o de elop such a angemen s
(Pasadilla 2011).
13
Wo k is s a ing a he bila e al le el, bu i is ea ly days (e.g., Vie Nam is in he p ocess o nego ia ing
i s i s such ag eemen wi h he ROK; Aus alia and Vanua u ha e an ag eemen o allow ans e o
Aus alian DC unds o Vanua u mig an wo ke s o he Vanua u p o iden und). A p omising egional
ini ia i e is he 2022 Decla a ion on Po abili y o Social Secu i y Bene i s o Mig an Wo ke s in he
Associa ion o Sou heas Asian Na ions. I commi s o policy co e age o mig an wo ke s and building
a ne wo k o social secu i y ag eemen s, which would allow o po abili y o pension igh s ac oss
economies.
One conside a ion o keep in mind as his wo k p og esses is ha unded DC schemes lend
hemsel es o simple po abili y and o aliza ion a angemen s han DB schemes. Bu ecen
inno a ions include he edesign o bene i s ha sepa a e p e-sa ing and edis ibu ion aspec s,
allowing DB igh s o be ans e ed wi h he use o mul ina ional p i a e sec o p o ide s (Holzmann
2018). A na ional le el, he PRC has also adop ed guidelines ha egula e c oss-p o incial po abili y
o bo h DB and DC en i lemen s.
D. Ge ing Mo e om Volun a y Schemes
Manda ed app oaches alone will only achie e so much success in add essing pension co e age gaps in
se ings whe e uly in o mal wo k con inues o domina e. The e o e, some Asia and he Paci ic economies
ha e in oduced olun a y schemes o in o mal sec o wo ke s ha p o ide a con ibu ion ma ch om
gene al e enues and o he ea u es o incen i ize old age sa ings.
The app oach was ini ia ed by S i Lanka in 1987–1990 o a me s and ishe men. The ROK ollowed sui
in 1995 o he same g oups. O e he las decade o so, o he Asian economies ha e done he same,
including India, Malaysia, he Philippines, Thailand, Vie Nam, and mos ecen ly Bangladesh. A unique
hyb id o a ma ching scheme was in oduced in he PRC in 2009, i s o u al and hen all in o mal wo ke s.
I combines a modes ma ch on con ibu ions ex-an e wi h p o ision o a (modes ) li e ime basic pension
a e age 60 a e 15 yea s o con ibu ions o he lump-sum equi alen (Dong and Pa k 2019).
Mos such schemes a e speci ic o in o mal wo ke s, al hough i is in eg a ed in o he main scheme in
Vie Nam. Mos a e DC designs, hough India and Vie Nam use a DB app oach. Adminis a ion is
ypically done by he mains eam pension au ho i ies, p o iding a deg ee o c oss-subsidy o
adminis a i e cos s. The le el o ma ching also a ies signi ican ly ac oss economies, wi h some
o e ing a 1:1 ma ch (e.g., India and he ROK) and o he s as low as 15% ma ch on con ibu ions
(Malaysia). In some schemes, he e is a li e ime limi on he pe iod o cumula i e amoun o ma ching
(e.g., Malaysia's i-Sa aan and i-Su i ma ching schemes in oduced li e ime caps on he go e nmen
ma ch in he 2024 budge , which is equi alen o 10 yea s o he annual maximum ma ch in each case;
14
India's A al Pension Yojana scheme had a 5-yea limi , hough he mo e ecen P adhan Man i Sh am
Yogi Maan-dhan scheme has emo ed ha ). O en, he e is also an annual cap on he amoun o he
ma ch. Fo mos schemes, he design is simple and lexible: con ibu ion amoun s can be modes and
i egula o accommoda e he ola ili y o in o mal sec o incomes.
Globally, o he inno a ions in ma ching schemes ha e been in oduced, including (i) bundling
e i emen sa ings wi h sho - e m bene i s o add ess he mul iple needs o in o mal wo ke s and
myopia wi h espec o old age sa ings ( his may include li e o une al insu ance, heal h o ma e ni y
co e , o access o o he inancial p oduc s such as mic o inance.); (ii) simpli ica ion o know-you -
cus ome equi emen s o opening accoun s (e.g., India's A al Pension Yojana scheme); (iii) use o
au o-en ollmen , au o-deduc ions, o au o-escala ion wi h op -ou s; (i ) eliance on con ibu ion
agg ega o s (e.g., ades unions, wo ke associa ions, coops, mic o inance ins i u ions, sel -help
g oups, and elcos) o inc ease pee incen i e e ec s and e iciency o adminis a ion o p og am
implemen e s; and ( ) expansion o con ibu ion channels, in pa icula , use o mobile paymen s,
pla o ms (e.g., Wha sApp in India), and con enience s o es.
While ma ching schemes can li olun a y con ibu ions and inc ease pa icipa ion in old age sa ing,
low combined con ibu ions, li e ime caps, and/o low con ibu ion densi y s ill mean ha only modes
inancial p o ec ion o he ele an g oups is likely as hey each old age. Inc emen al co e age has
also been modes o da e. In Malaysia, Vie Nam, and India, only an addi ional 1%, 3%, and 5%,
espec i ely, o he wo king age popula ion ha e joined a ma ching scheme. Thailand has had mo e
impac , wi h abou 12% o he wo king age popula ion in ma ching schemes. The mos no able
successes wi h ma ching schemes ha e been he ROK, which mo e han doubled pa icipa ion
be ween 1995 and 1999, and he PRC’s hyb id scheme, which co e ed mo e han 380 million
con ibu o s by 2020, mo e han 90% o hem in u al a eas (Wang and Feng 2022).
E. Deli e ing Adequacy and Sus ainabili y in Con ibu o y Schemes
While policies o inc ease co e age a e impo an , he le el and iscal a o dabili y o con ibu o y
schemes also equi e policy a en ion. Fo DC schemes, iscal sus ainabili y is ensu ed by design (in
he absence o gene ous minimum bene i gua an ees), bu adequacy emains a majo challenge. This
is commonly because o low o incomple e con ibu ion densi y, pa icula ly o women (sec ion V.F);
gene ous ea ly wi hd awals ules (e.g., om designa ed con ingency accoun s in places like India,
Malaysia, and mos Paci ic DMCs); ea ly wi hd awal ages (e.g., Ki iba i, Malaysia, and S i Lanka); and
low und in es men e u ns in some economies (e.g., in se e al Paci ic DMCs his o ically). E en when
DC accumula ions a e mo e subs an ial, lump sum wi hd awal ules can comp omise adequacy since
hey a e ypically exhaus ed wi hin a sho pe iod a e access and hus ail o p o ide inancial
15
p o ec ion ac oss olde ages (e.g., in Malaysia, he majo i y o membe s a e es ima ed o exhaus hei
lump sum wi hin 3 yea s o wi hd awal a age 55). The lump sum app oach is pa icula ly an issue in
cul u es whe e sha ing o esou ces among ex ended amilies and clan o ibal ne wo ks is p e alen
(e.g., wan oks in Melanesia). A he same ime, he absence o unde de elopmen o annui y ma ke s
ac oss mos eme ging economies in he egion make a apid ansi ion o annui ized bene i s unlikely,
and an app oach o phased wi hd awals has been p e e ed in a numbe o cases (c ea ing, in e ec ,
a “ e m DC”).
Fo NDC schemes (e.g., in Aze baijan, he Ky gyz Republic, and Tajikis an), bene i s a e paid
h oughou old age, bu he bene i le el is adjus ed acco ding o li e expec ancy a e i emen o each
coho , which ensu es iscal sus ainabili y bu may ye comp omise adequacy.
Fo DB schemes, he ade-o be ween bene i adequacy and iscal sus ainabili y in many egional
economies has ended o be s uck in a o o p o iding adequa e bene i s, wi h a endan isks o
iscal sus ainabili y and a u u e e e sal o pension p omises. The pa e n has been obse ed in
OECD economies in he pas , which had gene ous pension o e s ha we e la e cu ailed in esponse
o popula ion aging (Whi ehouse e al. 2009a). This is e iden in Figu e 4A, which shows o en
signi ican bene i a es in eme ging economies in Asia and he Paci ic.
Fo some economies (e.g., he Philippines and Thailand), sus ainabili y conce ns a e d i en mo e by
low DB con ibu ion a es, while o o he s (e.g., Vie Nam) i is d i en mo e by high a ge eplacemen
a es e en whe e con ibu ion a es a e signi ican . As a esul , a numbe o DB schemes in he egion
ace se ious sus ainabili y challenges o e he medium o long un. A he same ime, he absence o
ule-based indexa ion mechanisms o bene i s in paymen in mos economies (excep in Vie Nam)
p o ides a iscal le e o con ol cos s (e.g., no inc easing bene i s a imes o in la ion), bu e odes
adequacy by s eal h (Whi ehouse e al. 2009b). I is c ucial o index pension alues o a measu e o
communi y s anda ds (e.g., wages; e e o sec ion V.C), o a a minimum o p ices o ensu e sus ained
pu chasing powe .
In discussion a ound pension sys em sus ainabili y and adequacy, a common and cha ged deba e in
many economies in he egion has been a ound aising e i emen and/o access ages o pensions
and old age sa ings. A numbe o economies s ill ha e e i emen ages ha we e se decades ago
when li e expec ancy a e i emen was yea s lowe han p esen ly (e.g., he PRC and Thailand) and
he issue is mo e p onounced o women in economies wi h di e en ial e i emen ages. While he e
has been p og ess in he numbe o economies in Asia and he Paci ic g adually inc easing hei
e i emen ages (including Indonesia, Vie Nam, and he Cen al Asia and Caucasus economies ea ly
in he ansi ions), a common sou ce o esis ance is he conce n ha aising e i emen ages will
16
comp omise he labo ma ke p ospec s o younge wo ke s. This conce n, known as he “lump o
labo allacy” has been epea edly shown no o be bo ne ou in p ac ice in OECD economies. Mo e
ecen s udies in he PRC, Malaysia, and La in Ame ica each simila conclusions (Zhang 2012, Wo ld
Bank 2020 Apella 2024).
F. Inc easing Adequacy ia Redis ibu ion wi hin Con ibu o y Schemes
A hi d majo design ea u e o con ibu o y schemes is he deg ee o in e nal edis ibu ion
be ween highe -income and lowe -income con ibu o s. The e is conside able a ia ion in his
ega d (Figu e 4B). In gene al, in DC schemes, a ge eplacemen a es o low-income and high-
income ull-ca ee wo ke s a e expec ed o be simila in economies wi h indi idual accoun and
p o iden und DC schemes (e.g., Indonesia, Malaysia, Singapo e, and S i Lanka). In con as ,
some pension sys ems in Asia and he Paci ic o e subs an ially highe eplacemen a es o low-
income wo ke s h ough a combina ion o minimum pension loo s, con ibu ion caps, bene i
ceilings, o o he la a e componen s o bene i schedule design (e.g., A menia, India, he Ky gyz
Republic, Pakis an, and he Philippines). In some cases, he ea nings link o DC schemes is
weakened ia ax o by way o noncon ibu o y uni e sal o a ge ed schemes ha aise
eplacemen a es o low-income wo ke s (e.g., Thailand and, among ad anced economies in he
egion, Aus alia; e e o sec ion IV on a ge ing). The esul can mean ha , in a numbe o
economies, o mal wo ke s on hal he a e age wage can expec 20- o 30-pe cen age poin highe
eplacemen a es han hose on wice he a e age wage, and in he case o Pakis an, mo e han
60 pe cen age poin s highe .
Figu e 4A: Ne and G oss Replacemen Ra es
0%
20%
40%
60%
80%
100%
Ne Replacemen Ra e G oss Replacemen Ra e
Con inued on he nex page
17
Figu e 4B: Ne Replacemen Ra es o High- and Low-Income Ea ne s
PRC = People’s Republic o China; ROK = Republic o Ko ea.
No e: Replacemen a es a e o ull ca ee wo ke s (s a ing wo k a age 22 and e i ing a he p e ailing economy’s
access age) de ined as pension en i lemen as a p opo ion o p e- e i emen ea nings. La es a ailable yea .
Sou ce: O ganisa ion o Economic Co-ope a ion and De elopmen 2022
IV. COVERAGE AND ADEQUACY VIA SOCIAL PENSIONS
A. The Incomple e B idge o he Co e age and Adequacy Gap
Gi en he challenges o achie ing widesp ead pa icipa ion in con ibu o y schemes and pe sis en ly
high in o mali y, an inc easing numbe o economies in Asia and he Paci ic ha e supplemen ed
con ibu o y schemes wi h noncon ibu o y social pensions wi h some success. These exhibi
conside able a ia ion in e ms o co e age, om being he ounda ional pilla o he en i e pension
sys em a one ex eme (e.g., Geo gia and Timo -Les e) o absen o negligible (e.g., Cambodia, he
Lao PDR, Pakis an, S i Lanka, and se e al Paci ic DMCs).
Among economies ha do ha e social pensions, he ade-o be ween iscal sus ainabili y and adequacy
has o en p io i ized he o me . Indeed, a ypical cha ac e is ic in he egion is a low le el o social pension
co e age, low le el o bene i s, o bo h (Figu e 5). Only i e economies in Asia and he Paci ic ha e bene i
le els abo e he global a e age o 16% o GDP pe capi a, and h ee ha e bene i s abo e he OECD
a e age o 22%. In addi ion, 11 eme ging economies in he egion ha e social pension co e age below
50% o he age eligible popula ion (o en well below) e en as hei con ibu o y sys ems emain
unde de eloped. In es men in social pensions is ypically e y low (Figu e 1), in some cases a he same
ime as con inued high a es o public in es men in eg essi e and en i onmen ally ha m ul subsidies and
excessi e spending on gene ous ci il se ice o mili a y pensions (Damania e al. 2023, Asian
De elopmen Bank [ADB] 2016).
0%
20%
40%
60%
80%
100%
Ne RR o high ea ne s (2 x a g) Ne RR o low ea ne s (0.5 x a g) pp di e ence
18
Figu e 5: Social Pension Co e age and Bene i Le els
GDP = g oss domes ic p oduc , OECD = O ganisa ion o Economic Co-ope a ion and De elopmen , PRC = People’s
Republic o China, ROK = Republic o Ko ea.
No es: Based on da a om 2018 o la es . Bene i a es can di e o di e en g oups (e.g., Thailand has di e en a es
by age: hose 60–69 ge B600, which inc emen s wi h each decade o li e by B100 pe mon h, o maximum o B1,000
pe mon h o e 90 yea s o age).
Sou ce: Au ho s’ bes es ima es based on da a om he Uni ed Na ions 2022, Wo ld Heal h O ganiza ion 2023,
In e na ional Mone a y Fund 2023, In e na ional Labou O ganiza ion 2023a, In e na ional Labou O ganiza ion 2023b,
O ganisa ion o Economic Co-ope a ion and De elopmen 2022 and 2024, Wo ld Bank WDI, P4SP 2024 o PICs,
HelpAge In e na ional 2018, Allianz 2023, and Asian De elopmen Bank pe sonnel and na ional sou ces.
B. Raising Social Pension Bene i Le els o Imp o e Adequacy
The ou come o low social pension bene i s is ha , e en whe e hey ha e subs an ial each, exis ing
schemes end o ha e modes impac s on he well-being o olde people and a e weak in educing
po e y ( hough ha e he po en ial o achie e a eal impac in some economies [Box on page 21]).
Fo example, in Thailand, aising he social pension bene i le el o 16% o GDP pe capi a is es ima ed
o mo e ano he 12% o olde households abo e he pu chasing powe pa i y (PPP) $6.85 pe day
po e y line, educing he PPP $6.85 po e y a e o jus 4.47% o households wi h olde pe sons.
Simila ly, aising he bene i o 16% o GDP pe capi a in India would also mo e 12% o olde
households abo e he PPP $3.65 pe day po e y line, educing olde households’ PPP $3.65 po e y
a e o 593%. Highe bene i le els would ob iously educe po e y u he . Fo example, i India’s and
Thailand’s social pension bene i was in line wi h 22% o GDP pe capi a, i would educe old-age
po e y o 48% and 2%, espec i ely, among olde households (no ing he di e en ial po e y lines).
PRC
Mongolia
Indonesia
Malaysia
Myanma
Timo -Les e
Bangladesh
Nepal
S i Lanka
A menia
Aze baijan
Kazakhs an
Tajikis an
Uzbekis an
Fiji
Ki iba i
Samoa
Hong Kong, China ROK
0%
5%
10%
15%
20%
25%
30%
35%
40%
0% 20% 40% 60% 80% 100%
Social pension bene i (% o GDP)
Social pension co e age (% o 60+ popula ion)
Asia and he Paci ic Non-Asian Economies
OECD a e age bene i
Global a e age bene i
19
By con as , aising he bene i o he global a e age o social pensions (16% o GDP pe capi a) o
he OECD a e age (22% o GDP pe capi a) is es ima ed o make a a g ea e di e ence, wi h
a ia ion be ween economies depending on le el o de elopmen , consump ion dis ibu ion, and
household composi ion (Figu e 6A).
Figu e 6A: Simula ed Old Age Po e y Ra es, By Le el o Bene i and PPP Po e y Lines
Figu e 6B: Simula ed Fiscal Cos s, By Le el o Bene i
A g = a e age, GDP = g oss domes ic p oduc , OECD = O ganisa ion o Economic Co-ope a ion and De elopmen ,
PPP = pu chasing powe pa i y, soc = social.
No es: Simula ion is o 2024 po e y a es o households wi h age eligible pe sons and iscal es ima es assuming
uni e sal co e age o people aged 65+. No e di e en scales in spending cha s.
Sou ces: Au ho s’ bes es ima es based on da a om he Uni ed Na ions 2022, Wo ld Heal h O ganiza ion 2023,
In e na ional Mone a y Fund 2023, In e na ional Labou O ganiza ion 2023a, In e na ional Labou O ganiza ion 2023b,
O ganisa ion o Economic Co-ope a ion and De elopmen 2022 and 2024, Wo ld Bank WDI, P4SP 2024 o PICs,
HelpAge In e na ional 2018, Allianz 2023, and Asian De elopmen Bank pe sonnel and na ional sou ces; Au ho s’
analysis o da a om Uni ed Na ions Economic and Social Commission o Asia and he Paci ic (2023).
Geo gia
India
Indonesia
Ki iba i
Thailand
Uzbekis an
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
0% 4% 8% 12% 16% 20%
Simula ed old age $2.15 PPP
po e y a e by le el o bene i
OECD a e age soc.
bene i (22% GDP pc)
Global a e age soc.
bene i (16% GDP pc)
% o ecepien households in po e y
Geo gia
India
Indonesia
Ki iba i
Mongolia
Thailand
Uzbekis an
0% 4% 8% 12% 16% 20%
Simula ed old age $3.65 PPP
po e y a e by le el o bene i
Geo gia
India
Indonesia
Ki iba i
Mongolia
Thailand
Uzbekis an
0% 4% 8% 12% 16% 20%
Simula ed old age $6.85 PPP
po e y a e by le el o bene i
Geo gia
Thailand
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
0% 4% 8% 12% 16% 20%
Simula ed iscal cos
by le el o bene i
OECD a g soc bene i 22% GDP
pc
Global
a e age soc
bene i 16% GDP pc
Spending on social pension as % o
GDP
India
Indonesia
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
1.6%
1.8%
0% 4% 8% 12% 16% 20%
Simula ed iscal cos
by le el o bene i
Ki iba i
Mongolia
Uzbekis an
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
0% 4% 8% 12% 16% 20%
Simula ed iscal cos
by le el o bene i
20
Choosing he exac bene i le el is ul ima ely a poli ical conside a ion ela ed o social iews o po e y
and iscal capaci y. While he basic accep able s anda d o li ing could be judged agains some absolu e
alue (e.g., a ixed baske o goods), wi h inc easing de elopmen , economy-wide benchma ks such as
ela i e po e y lines, sha e o GDP pe capi a, minimum wages o communi y s anda ds end o apply
(OECD 2023). As wi h pa ame e s in con ibu o y schemes, he ad an age o aising and anspa en ly
linking bene i s o a measu e o na ional income ensu es ha bene i s do no e ode o e ime, se ing
he in eg i y o he pension sys em (e.g., Vie Nam, despi e pe iodic inc eases in social pension bene i s,
has seen he eal alue o bene i s e oded by a ound 25% o e ime).
The simula ion exe cise can also shed ligh on conce ns abou iscal sus ainabili y o social pensions
(Figu e 6B). Spending on a uni e sal social pension wi h a bene i se a 16% o GDP pe capi a would, in
2024, be expec ed o cos be ween 0.7% o GDP (in Ki iba i) and 2.9% o GDP (in Thailand). The
di e ences a e d i en by he age dis ibu ion o he popula ion, which also shi s o e ime. Fo example,
apid aging in Thailand can be expec ed o inc ease he cos s o such a scheme o 3.6% o GDP in 2034.
One solu ion o achie e adequa e social pension bene i s while ensu ing iscal sus ainabili y is a ge ing o
bene i s, discussed in he ollowing sec ion.
27
Figu e 7B. Simula ed Fiscal Cos o Uni e sal Social Pension wi h Va iable Eligibili y Age
(% o GDP)
GDP = g oss domes ic p oduc .
No es: Based on social pension bene i se a 16% o GDP. Based on bina y es o means whe e only hose wi hin he
indica ed p opo ion o popula ion ecei e i . Assumes adminis a ion cos o 5% o cos o scheme. In Figu e A, eligibili y
age is cons an a 65. In Figu e B, all age eligible households a e assumed o ecei e he bene i .
Sou ce: Au ho s’ analysis o da a om Uni ed Na ions Economic and Social Commission o Asia and he Paci ic (2023).
An ine i able ques ion when conside ing he easibili y o an expanded social pension is how i would
be inanced. The ques ion is mo e acu e in he economies o Asia and he Paci ic ha ha e e y low
agg ega e public e enues, and o en signi ican deb se ice obliga ions (Figu e 1). Fo some
economies, he e is po en ial o c ea e iscal space h ough ealloca ion o exis ing spending, mos
no ably om consume uel subsidies (e.g., Indonesia, Malaysia, and Pakis an). In such ins ances, he
cos o such subsidies p esen ly easily exceeds he po en ial cos s o in oducing o expanding a well-
designed social pension. A second sou ce o po en ial iscal space is pa ame ic e o ms o
con ibu o y schemes, such as inc eases in e i emen age, adjus men s in acc ual a es, o ac ua ially
de e mined ea ly e i emen p o isions. Fo example, modelling o Indonesia shows ha he legisla ed
g adual inc ease in e i emen age in i s con ibu o y scheme would inance a ound one qua e o he
cos o in oducing a modes social pension (Kud na, Piggo , and Poonpolkul 2024). Re o ms o e y
gene ous ci il se ice and mili a y schemes o e pa icula po en ial in his ega d. Beyond measu es
o educe exis ing expendi u es, he ques ion becomes a wide one o how o imp o e public e enue
pe o mance o c ea e iscal space o social pensions, enhanced MDC ma ching, pension und de ici
co e age, o indeed any o he gene al e enue inanced expendi u e. While g ea e eliance on
p og essi e income axes would be desi able, he combina ion o high in o mali y, gene ous PIT
h esholds, and some imes weak ax adminis a ion capaci y limi s he scope o ha channel in much
Geo gia
India
Indonesia
Ki iba i
Mongolia
Thailand
Uzbekis an
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
65 66 67 68 69 70 71 72 73 74 75
Access age
Spending on social pension as % o GDP
28
o Asia and he Paci ic. Looking a o he e enue ins umen equi es balancing conside a ions o hei
e enue po en ial, cos s and easibili y o adminis a ion and compliance, impac s on g ow h and
incen i es o i ms and wo ke s, edis ibu i e implica ions, and o he ac o s (Te -Minassian 2019).
V. OTHER POLICY PERSPECTIVES AND INNOVATIONS
The complexi y o pension sys ems means ha he e a e mul iple objec i es, mo ing pa s, and
pe spec i es o conside beyond he b oad impe a i es o inc easing co e age, adequacy, and
main aining iscal sus ainabili y. He e we ouch on se e al speci ic issues o Asia and he Paci ic
pension e o m agenda. These include: wo k incen i es o pensions, in e ac ion wi h p i a e ans e s,
au oma ic adjus men mechanisms (AAMs) in pensions, gende dimensions, lessons and ami ica ions
o he co ona i us disease (COVID-19) pandemic, and some inno a i e policy highligh s ha a e
ela ed o inancial decision-making and inancial echnology.
A. The In e ac ion be ween Pensions and Wo k Incen i es
Discussion abo e has ackled he e ec o a ge ing on incen i es and labo ma ke beha io o
households. Bu he e is e idence ha pensions sys ems exe o he inancial incen i es ha a ec
wo k and e i emen decisions (G ube and Wise 1998, 1999). Recen li e a u e in Asia and he Paci ic
also sugges s ha ge ing pension se ings igh is impo an o wo k incen i es.
Fo example, he p obabili y o wo k o ce wi hd awal inc eases s a is ically signi ican ly upon ecei ing
a con ibu o y pension among u ban wo ke s in he PRC as well as u ban and u al men in Indonesia
(O’Kee e, Giles, and Yang 2021). In Thailand, he sligh ly mo e gene ous social pension also has had
some obse able impac (Giles and Huang 2017). By con as , he impac o ecei ing a hyb id social
pension is limi ed in he PRC (Zhang, Giles, and Zhang 2014).
I is unsu p ising ha whe e olde wo ke s can e i e ea ly on easonable incomes, hey choose o do
so. Fo policymake s, he balance is o se pension sys em pa ame e s in such a way ha olde people
a e p o ec ed, bu sys em incen i es s ill encou age people o wo k longe and con inue con ibu ing
o he pension sys em. The mos ob ious policy le e is pension access ages, he se ing o which
should conside bo h ai ness and long- e m sus ainabili y, as well as labo ma ke impac s (Chomik
and Whi ehouse 2010). As no ed ea lie , in many economies in he egion, access ages a e low o
social, con ibu o y, o bo h ypes o pensions, e en aking accoun o di e ences in heal hy and o al
li e expec ancy (e.g., he PRC, Solomon Islands, and Thailand, o con ibu o y schemes; he PRC,
Kazakhs an, Thailand, and Uzbekis an, o social pensions). These could be aised and linked o some
measu e o li e expec ancy (Sec ion C on au oma ic s abilize s).
29
Ano he policy le e is he ex en o which con ibu o y pensions equi e e i emen o ecei e a pension.
Such wo k es s o ea nings es s a e no uncommon, bu OECD economies ha e sough o emo e hem
(e.g., No way, he Uni ed Kingdom, he Uni ed S a es, and mos ecen ly Denma k). Mos economies o
he o me So ie Union emo ed such es s as pa o hei pension e o ms du ing ansi ion and p o iden
unds in Asia and he Paci ic do no ypically impose hem, bu some DB schemes in he egion ha e
e ained hem (e.g., he Philippines, o hose be ween ages 60 and 65). Modelling based on ad anced
economies sugges s ha emo ing wo k es s can delay e i emen bu educe claiming age, o en esul ing
in longe wo king li es bu wi h lowe wo k in ensi y (Song and Manches e 2007; Blundell, F ench, and
Te low 2016). Pension policymake s, he e o e, may wish o complemen he abolishmen o wo k es s
wi h mechanisms ha inc ease pensions i hese a e claimed la e . This akes place au oma ically wi hin
DC schemes and can be done ia an ac ua ially ai adjus men wi hin DB schemes.
Regula ions and laws ou side he pension sys em can also a ec e i emen choices. One ob ious
ea u e ela es o manda o y e i emen ages (e.g., Vie Nam had o amend i s labo code
p o isions on e i emen age be o e i was able o aise he age in social insu ance legisla ion). In
mos OECD economies, an i-age-disc imina ion legisla ion has sough o ou law manda o y
e i emen ages, hough in much o Asia and he Paci ic employmen disc imina ion legisla ion
gene ally has no ye explici ly included age as a p ohibi ed basis o wo kplace disc imina ion.
B. The In e ac ion be ween Pensions and P i a e T ans e s
Ano he po en ial ade-o when designing pension sys ems is be ween public and p i a e ans e s,
hough i is unclea he ex en o which such conce ns should inhibi he de elopmen o publicly
suppo ed bene i s. In many economies in Asia and he Paci ic, inancial ans e s om adul child en
o olde pa en s occu , hough empi ical e idence om Eas Asia and Sou heas Asia sugges s ha
hey a e o en less subs an ial and, in ne e ms, kick in no ably la e han popula ly belie ed (Wo ld
Bank 2016). None heless, unde s anding whe he social pensions may c owd ou p i a e ans e s is
an impo an conside a ion in assessing hei ne wel a e impac .
E idence om de eloped economies sugges s ha he c owding ou e ec s o public ans e s end
o be modes (Felds ein and Liebman 2002). A use ul li e a u e e iew o c owding ou e ec s o public
ans e s in de eloping economies is p o ided by Nikolo and Bonci (2020). Fo pensions speci ically,
including social pensions, jus o e a hi d o he s udies e iewed globally ind no c owding ou e ec
o pension ans e s on amilial ans e s, hough he a e age e ec ac oss all s udies e iewed was
abou 27% o he ans e amoun .
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Tha said, egional s udies in he PRC, India, and Nepal sugges low le els o c owding ou and, e en
in some cases, signi ican c owding in (Nikolo and Adelman 2019; Chen e al. 2016; Kang 2004;
Du a, O’Kee e, and Rashid 2008). In Nepal, c owding-in o p i a e ans e s saw an addi ional 20% in
p i a e ans e s o social pension ecipien s. O e all, he au ho s also ind ha gende impac s may
di e , bu again no in consis en di ec ions ac oss economies. A s udy in Bangladesh, o example,
on c owding ou o p i a e ans e s ound ha he e ec was la ge o olde men han olde women
(McKe nan, Pi , Moskowi z 2005). An impo an akeaway is ha indings ac oss economies a e
a iable, sugges ing ha obus e alua ion o wel a e impac s o social pensions should be ca ied ou
o indi idual economies. In such s udies, i is also i al o conside non inancial suppo om adul
child en o olde pa en s, whe he in he o m o housing, ca e suppo , ood, o o he in-kind suppo .
Beha io al esponses wi h espec o non inancial suppo may well di e om hose o inancial in e -
amilial ans e s.
C. Au oma ic Adjus men Mechanisms in Pension Sys ems
A s iking ea u e o pension sys ems in eme ging Asia and he Paci ic is he absence o AAMs, which
ha e become an inc easingly common ea u e o pension sys ems in OECD economies (DC and NDC
schemes in Asia and he Paci ic a e an excep ion). AAMs e e o “p ede ined ules ha au oma ically
change pension pa ame e s o pension bene i s based on he e olu ion o a demog aphic, economic,
o inancial indica o ” (OECD 2021). F om a sys em iewpoin , hese help pensions emain sus ainable
in he ace o e ol ing ac o s. F om a poli ical iewpoin , hey educe poli ical u bulence
accompanying ad hoc adjus men s in pensions. F om he households’ iewpoin , hey p o ide g ea e
p edic abili y a ound pension income (e.g., ia ule-based indexa ion o pensions), hough may also
esul in downwa d adjus men s o bene i s. In 2021, abou wo- hi ds o OECD economies had one o
mo e AAMs buil in o hei manda o y o quasi-manda o y pension sys ems.
AAMs can ake se e al o ms: (i) an NDC s uc u e o he pension sys em which has inbuil adjus men
mechanisms a ound shi ing demog aphics (e.g., Aze baijan, he Ky gyz Republic, and Tajikis an in
Asia; and I aly, No way, Poland, and Sweden in OECD); (ii) adjus men s in access age au oma ically
linked o changes in li e expec ancy (e.g., on a 1:1 basis as in Denma k and I aly o some p opo ion
o he inc ease in li e expec ancy as in Finland, he Ne he lands, and Po ugal); (iii) bene i s
adjus men s au oma ically linked o li e expec ancy, demog aphic a ios, wage bill, o GDP (as in
Finland, G eece, Japan, and Po ugal); (i ) balancing mechanisms o ensu e sho - e m o long- e m
p ojec ed inancial balance o pensions, elying on di e ing combina ions o changes o pension
bene i s, poin s, o con ibu ion a es (e.g., Canada, Ge many, he Ne he lands, Sweden, and he
Uni ed S a es); and ( ) unded DC sys ems (when no minimum bene i gua an ee is p o ided) also ac
31
as au oma ic s abilize s as no ixed p omise is made abou he le el o pension un il he poin o
e i emen (i.e., longe li e expec ancies au oma ically means he low o bene i s will be lowe o las
less long).
While AAMs help wi h p edic abili y o pension sys ems, hey also ha e limi a ions, as seen by OECD
examples whe e hey ha e been changed o cancelled. Like any public policy, hey may be e e sed
because o poli ical p essu e (e.g., as in Ge many, he Slo ak Republic, and Spain), o dilu ed ia
empo a y suspensions (e.g., as in I aly and he Ne he lands). Al e na i ely, echnical design issues
o unan icipa ed de elopmen s in indica o s may unde mine hei implemen a ion (e.g., whe e
p ojec ed and ac ual li e expec ancies di e ge).
Al e na i e app oaches o achie e long- e m equilib ium o pension sys ems include he use o ese e
unds. This app oach was ini ia ed in he Uni ed S a es social secu i y sys em and, subsequen ly, has
been adop ed in mo e han 20 OECD economies, including Japan and he ROK, and mo e ecen ly in
he PRC. Rese e und asse s in se e al OECD economies amoun o o e one qua e o GDP, wi h
abou a hi d o GDP in Japan, abou 45% in he ROK, bu only abou 3% o GDP o da e in he PRC
(OECD 2021).
Unde pinning any mechanism o p omo e balance and sus ainabili y o public pension sys ems should
be egula ac ua ial p ojec ions o he sys em inances, p e e ably wi h sensi i i y analysis a ound he
unde lying assump ions. Regula p ojec ions a e pa icula ly impo an in a egion like Eas and
Sou heas Asia which a e apidly aging, o Sou h Asia, which will soon begin o. While a g owing
numbe o public pension unds in he egion unde ake such analyses, i is impo an o manda e such
a p ac ice and ensu e ha i is ca ied ou egula ly (say e e y 3 yea s o so as is manda ed o EU
economies, o example).
D. Go e nance Issues in Pension Sys ems
P omises and p ese a ion o pension igh s mus su i e o long pe iods in pension sys ems, and
his ine i ably s ains go e nance in any economy. In public pay-as-you-go sys ems, p omises a e
ou inely b oken by go e nmen s: access ages a e inc eased, su i o pensions a e cu , and
indexa ion o pensions in paymen is educed. These ac ions, howe e , a e aken by accoun able
go e nmen s (i.e., in mos cases, go e nmen s can lose o ice because o b oken p omises, o a ailu e
o deli e ).
Less clea a e he na u e and implica ions o go e nance ailu e in p e- unded pensions sys ems,
pa icula ly whe e p i a e und manage s a e pa o he sys em. He e, inancial and legal go e nance
32
mus be obus o e he whole pe iod o wo king li e and o en beyond. This is challenging in ad anced
economies wi h decades o expe ience in managing long- e m con ac ual sa ing. In eme ging
economies, he isk o go e nance ailu e mus be ac o ed in o pension design. Whe e p i a e und
manage s a e in ol ed, he e a e addi ional issues o capaci y o pension und supe iso s and
p incipal-agen challenges.
A one ex eme, aud and/o embezzlemen o go e nmen o p i a ely managed pension unds emain
eal isks whe e egula o y o e sigh is weak (e.g., he a es o Kazakhs an’s pension und head in 2017
o embezzlemen ; in es men o pension o p o iden und asse s in businesses o connec ed pa ies
as occu ed in some Paci ic DMCs p o iden unds in he 1990s and ea ly 2000s).
Go e nance sho comings can ake many o ms. A d ama ic example is when indi idual accoun s a e
na ionalized and go e nmen s enege on he sys em design and p omises (e.g., A gen ina’s and
Hunga y’s na ionaliza ion o unded accoun s). They may ake less d ama ic o ms such as he use o
DC con ibu ions by subna ional au ho i ies in he PRC o make cu en pay-as-you-go pension
paymen s, esul ing in he widesp ead phenomenon o emp y accoun s in he con ibu o y pilla ,
comp omising adequacy o u u e pensions. By 2012, i was es ima ed ha mo e han 90% o indi idual
con ibu o y pension accoun s in he PRC we e emp y (Zuo 2014).
Whe e p i a e playe s a e in ol ed in he collec ion, in es men , and managemen o manda ed pension
schemes, go e nance challenges end o be mo e acu e in de eloping economies. This may be because
o low egula o y capaci y o agencies ha a e supe ising p i a e und manage s, lack o compe i ion in
he und managemen sec o , o poo ly managed inancial ins i u ions wi h opaque managemen
p ac ices.
In his con ex , he In e na ional Social Secu i y Associa ion (ISSA), he In e na ional O ganiza ion o
Pension Supe iso s (IOPS), and OECD (2016) p o ide use ul guidance and s anda ds. ISSA’s Good
Go e nance Guidelines o Social Secu i y Ins i u ions ocus on go e nance o public pension
o ganiza ions and IOPS’ P inciples o P i a e Pension Supe ision ocus on p i a ely managed unds.
The ISSA guidelines emphasize i e mu ually en o cing p inciples o pension und go e nance:
accoun abili y, anspa ency, p edic abili y, pa icipa ion, and dynamism.
Accoun abili y equi es ha social secu i y adminis a o s a e accoun able o managing he p og am
p uden ly, e icien ly, and equi ably. T anspa ency equi es a ailabili y and accessibili y o accu a e,
essen ial, and imely in o ma ion o ensu e ha s akeholde s a e well in o med o he ue s a e o he
social secu i y p og am, and clea and simple ules, sys ems, and p ocesses o limi disc e ion and
a bi a iness in p og am adminis a ion. P edic abili y e e s o he consis en applica ion o he law and
33
i s suppo ing policies, ules, and egula ions. Fo social secu i y p og ams, he igh s and du ies o
membe s and bene icia ies mus be well-de ined, p o ec ed, and consis en ly en o ced. Pa icipa ion
e e s o he ac i e educa ion, engagemen , and e ec i e in ol emen o s akeholde s o ensu e he
p o ec ion o hei in e es s. Dynamism e e s o ongoing imp o emen s in und ope a ions.
IOPS p o ides guiding p inciples o he egula ion and ope a ion o p i a e pension sys ems, including
he need o clea objec i es on co e age, adequacy, secu i y, e iciency, and sus ainabili y. The IOPS
p inciples o m he basis o he 2016 OECD Co e P inciples o P i a e Pension Fund Regula ion. Some
Asian economies a e aking no e. Recen policy e isions in he PRC o supe ision o social insu ance
unds exp essly s a e many o hese same p inciples. In addi ion o he p inciples, IOPS also has a se ies
o de ailed guidelines on speci ic dimensions o p i a e pension und managemen and supe ision (e.g.,
licensing o unds, isk managemen p ac ices, und p ojec ions, use o al e na i e in es men s and
de i a i es, and in eg a ion o en i onmen al, social, and go e nance p inciples in in es men ).
In addi ion o he egula ion and managemen o p i a e unds hemsel es, he OECD and IOPS place
s ong emphasis on well- unc ioning capi al ma ke s and inancial ins i u ions o ensu e ha pension
sa ings can achie e adequa e and di e si ied in es men e u ns ha balance isk and e u n o e ime.
Whe e hese condi ions do no exis domes ically, economies may conside a ypical op ions. Ki iba i
p o ides an example in Asia and he Paci ic absen local capi al ma ke s whe e he p o iden und
ou sou ces und managemen o an o sho e und manage in Aus alia.
Public us in go e nmen and inancial ins i u ions is i al o he de elopmen o unded pension
sys ems, and indeed any pension sys em. A ailable e idence on public us sugges s a ying le els
o us in public ins i u ions in gene al in Asia and he Paci ic (Figu e 8). Mo e gene ally, in he egion,
while he sha e o people who a e banked has inc eased s eadily in ecen yea s, among hose who
emained unbanked (o e whelmingly in he in o mal sec o whe e he pension co e age challenge is
mos acu e), lack o us in inancial ins i u ions emains a non-negligible ba ie (e.g., in India and
Uzbekis an [Figu e 11B]).
One o e a ching way o balance isks i o no pu all o a pension sys em’s “eggs in one baske :” mul i-
pilla s uc u es a e be e p o ec ed when one pa o he sys em does no deli e on i s p omises.
34
Figu e 8: Le els o T us in Business and Go e nmen
PRC = People’s Republic o China, ROK = Republic o Ko ea, UAE = Uni ed A ab Emi a es.
No es: Based on ques ion: “how much do you us he ins i u ion o do wha is igh [9-poin scale]”. Da a based on
No embe 2022.
Sou ce: Edelman T us Ba ome e (2023).
E. Pension Sys ems in Asia and he Paci ic Du ing COVID-19
Du ing he COVID-19 pandemic, many economies made empo a y adjus men s in hei pension
sys ems o help mi iga e he impac on con ibu o s and i ms. This was in addi ion o he widesp ead
expansion o di ec social assis ance cash ans e s. The mos common measu e was educ ions,
holidays, and de e men s in pension con ibu ion a es, bu se e al economies wi h p o iden unds
also allowed excep ional ea ly wi hd awals. In addi ion, a numbe o economies p o ided wage
subsidies ha mi iga ed he bu den o pension con ibu ions. Finally, a numbe o economies wi h DB
pension schemes empo a ily elaxed ules on he scheme unding equi emen s o educe he need
o eme gency asse sales, which would ha e had long- e m nega i e consequences on und balances
(OECD 2021, Fehe and di Bidegain 2020, Gen ilini e al. 2022).
Reduc ions, holidays, and de e men s o pension (and o en o he social) con ibu ions in Asia and he
Paci ic a ied in scope, du a ion, and scale. Fo example, in some economies, i ually all con ibu ing
i ms we e co e ed (e.g., Fiji and Thailand), while in o he s, he suppo was a ge ed by con ibu o
ype o by egion (e.g., in he PRC, ini ially in Hubei only, and hen o all a eas se iously impac ed
subsequen ly; in Samoa, con ibu ion holidays o small and medium-sized en e p ises only; in he
ROK, special ea men a ied o indi iduals acco ding o hei income le el and o i ms was ocused
on small and medium-sized en e p ises; in Uzbekis an, only o indi idual en ep eneu s; ; and in Vie
Nam, o i ms wi h a leas 50% o hei wo k o ce on empo a y lea e as a esul o COVID-19
impac s). In mos cases, ini ial sho - e m suppo ( o 2 mon hs–3 mon hs) was ex ended du ing 2020
and some imes beyond as he pandemic ook hold.
0
20
40
60
80
100 T us in business T us in go e nmen
35
The scale o educ ions in con ibu ions anged om ela i ely modes o qui e subs an ial (e.g., in Fiji, wo-
hi ds o he o al employe and employee con ibu ions we e wai ed du ing he la e h ee qua e s o
2020; in Thailand, con ibu ions we e educed o only 0.1% o wages o se e al mon hs in 2020). While
mos economies did no ha e any explici compensa ion o pension o p o iden unds o los e enues,
Mongolia was an example o an economy ha bo owed om he Wo ld Bank o compensa e i s pension
und. The e we e also examples o b inging o wa d pension paymen s (e.g., India), adding a one- ime
supplemen al paymen h ough he und (e.g., Samoa), o accele a ed in oduc ion o pe manen inc eases
in pension bene i s (e.g., Geo gia and Uzbekis an). Fo DB sys ems, he impac o educed con ibu ions
was bo ne by he und and, in he long- e m, he budge o he ex en ha u u e und de ici s widen.
Excep ional ea ly wi hd awals we e allowed in a numbe o economies wi h p o iden unds (e.g., Fiji,
India, Malaysia, Papua New Guinea, Samoa, and Tonga). The impac was di ec ly on indi iduals’
longe - e m sa ings because o wi hd awals (some imes du ing a ough in asse alua ions) and lowe
bases o compounding o in es men e u ns. Malaysia was a e y p onounced example, au ho izing
ou ounds o special wi hd awals du ing 2020–2022, wi h wi hd awals o aling abou 15% o o al
asse s o he Employees P o iden Fund (Yap e al. 2023). E en p io o he pandemic, a e age
balances we e low, and he special wi hd awals u he educed he sha e o con ibu o s conside ed
o ha e minimal adequa e balances om 28% o 22% o e all, and om 34% o only 19% o hose
aged 26–30 (Bank Nega a Malaysia 2022). Gen ilini e al. (2022) p o ide a de ailed economy p o ile
o COVID-19 social p o ec ion esponses, including h ough he pension sys em, and Fehe and di
Bidegain (2020) p o ide a use ul summa y o pension policy esponses du ing COVID-19, di e en ial
impac s on pension unds and membe s unde di e en pension sys em a angemen s, and policy
guidance o use o he pension sys em in u u e c ises.
F. Gende Dimensions o Pension Sys ems in Asia and he Paci ic
Ac oss much o he wo ld, including Asia and he Paci ic, he e end o be signi ican di e ences
be ween gende s in he le el o inancial p o ec ion o e ed by public pension sys ems. This is a
p oduc o se e al ac o s which o en compound. The i s is he gende gap in labo o ce pa icipa ion
in ma ke wo k, and o en highe a es o in o mal sec o wo k e en o women engaged in ma ke
wo k. As a esul , many women a e no p ima y membe s o con ibu o y pension schemes. A second
ac o is he gende wage gap, which leads o lowe amoun s con ibu ed o e e en ull o mal wo k
his o ies. Fo example, in Eas Asia and he Paci ic, he egional gende wage gap in 2015 was abou
20%, and in Sou h Asia was 33% (UN Women 2015). A hi d ac o is he lowe densi y o pension
con ibu ions because o p ima y ca e du ies o child en, olde pa en s, and o en g andchild en. This
may be exace ba ed in economies whe e he o icial e i emen age o women is lowe han ha o
36
men (e.g., Bangladesh, he PRC, Geo gia, Kazakhs an, he Lao PDR, Pakis an, Uzbekis an, and Vie
Nam), a pa icula ea u e o economies wi h socialis sys ems o legacies. In DC sys ems, he longe
a e age li e span o women also means lowe a e age bene i s ac oss he emaining yea s o li e o
g ea e likelihood o exhaus ing lump-sum payou s.
Some nega i e gende ou comes in e ms o adequa e co e age a e pa ly o se in sys ems wi h
su i o bene i s o spouses o male pension con ibu o s in DB sys ems o inhe i ance o he und awn
accumula ion in p o iden unds o DC schemes ( hough accumula ions in mos p o iden unds in
Asia and he Paci ic a e usually exhaus ed be o e he dea h o he spouse). Mos DB schemes in he
egion ha e su i o bene i s, hough he design a ies ac oss economies and in he deg ee o
inancial p o ec ion o e ed. In some (e.g., he PRC, Indonesia, and Thailand), he su i o bene i is
paid as a lump sum, and hence does no assu e inancial p o ec ion h oughou olde age. O he
economies pay a li e ime bene i a di e ing le els, anging om ull bene i s equal o hose p omised
o he deceased (e.g., Malaysian ci il se ice scheme and he Philippines), o hose wi h a iable
ac ions o he deceased’s bene i (e.g., he ROK, Mongolia, and Uzbekis an), o some o he
benchma k (e.g., in Kazakhs an by a complex o mula in ol ing he bene i o he deceased and o he
adjus men ac o s, and in Vie Nam, a ac ion o he minimum wage). O e all, e en wi h ull bene i s,
he le el o p o ec ion om su i o schemes is only as s ong as he co e age and adequacy o he
con ibu o y sys em.
Bene i design ea u es wi hin con ibu o y sys ems ha include edis ibu i e elemen s a e likely
also o a o women ( loo s, la a es, caps, and minima). O he examples o pa ame e s ha di ec ly
a ec women include (i) long es ing pe iods which a e less likely o be me by women because o
ca ee in e up ions (and a e an undesi able ea u e o all wo ke s, pa icula ly hose who mo e
be ween o mal and in o mal sec o s o in and ou o he ju isdic ion du ing hei wo king li es); (ii)
ea men o pe iods ou o he paid wo k o ce because o ca ing o child- ea ing esponsibili ies
(e.g., his is aken accoun o in Hong Kong, China; Timo -Les e; and Vie Nam o example); (iii) he
use o sex-speci ic mo ali y a es o compu e annui ies in Hong Kong, China; India; Indonesia;
Malaysia; and Singapo e, mean ha women’s longe li e expec ancies esul in lowe bene i s (mos
OECD economies do no allow his, so ha annui y con ac s c oss-subsidize be ween sexes); and
(i ) how lowe pension access ages mean ha women end up wo king less long, sa e less o old
age, and ha e longe e i emen s (e.g., a ious economies in he egion, including he PRC, he Lao
PDR, Mongolia, and Vie Nam s ill ha e lowe access ages o women, some hing ha nea ly all
OECD economies ha e phased ou ).
43
howe e , hey ace challenges and oppo uni ies, some common and some s uc u e speci ic which
oge he o m a pension e o m agenda o he egion.
Social pensions a e a p io i y. In mos cases, social pensions a e ei he nonexis en o o e bene i s
well below po e y le els. Es ablishing e ec i e and adequa e social pension sys ems is a p io i y. Social
pensions ha e he po en ial o expand co e age o hose mos likely o ace po e y when hei ea nings
capaci y is exhaus ed. When ca e ully bu inclusi ely a ge ed, he simula ed cos o adequa e social
bene i s need no be high e en in he ace o popula ion aging, and iscal space may be c ea ed wi h
e o ms o consume subsidies and in some economies’ con ibu o y schemes.
Exis ing social pensions ha e low co e age, low bene i s, o bo h. While social pensions exis in
a signi ican numbe o economies in Asia and he Paci ic, in nea ly all cases hey p o ide ( e y) low
bene i s/inadequa e inancial p o ec ion ( o he pu poses o ou analysis, adequa e is hough o as a
bene i abo e 15% o GDP pe capi a, based on a global a e age in social pension schemes o 16%
o GDP pe capi a). The adequacy challenge is exace ba ed o some by low co e age o social
pensions because o igh a ge ing ules.
Well- a ge ed social pensions a e a win-win. I designed well, such schemes di ec unds o hose ha
need hem; and because hey a e mo e iscally a o dable, hey impose ewe dis o ions ac oss he
economy. Two simpli ied o ms o social pension a ge ing al eady in place ac oss he egion include:
pension- es ing (whe e o mal scheme bene i s exclude indi iduals om eligibili y o social pensions) and
age-based a ge ing (whe e eligibili y age is subs an ially abo e age 65). These p o ide o mo e inclusi e
a ge ing in he ace o la ge con ibu o y co e age gaps and a e adminis a i ely s aigh o wa d. As digi al
echnology and inancial inclusion ad ances, he e is po en ial o le e age b oade online c oss-checks o
means which can p o ide mo e comp ehensi e means- es ing while educing/a oiding some o he
sho comings o cu en a ge ing me hods such as PMT.
Co e age in con ibu o y schemes emains a majo conce n, bu can be imp o ed. While
pension sys em designs a y, co e age o con ibu o y schemes is a common challenge because o
s ubbo n in o mali y. The con ibu o y co e age challenge is unlikely o be o e come in mos
economies in Asia and he Paci ic in he o eseeable u u e. A he same ime, egional and global
expe ience sugges s po en ial o some co e age expansion a he ma gin by ocusing on
(i) o mal sec o wo ke s no ye co e ed by design (e.g., sel -employed, business owne s, and hose
in en e p ises below a ce ain size); (ii) be e en o cemen (e.g., whe e employe s o e highe wages
o noncompliance); (iii) in o mal sec o wo ke s wi h o mal cha ac e is ics and/o moni o able income
(e.g., gig/pla o m con ac - o -se ice wo ke s); and (i ) manda ing con ibu ions o mig an s and
deepening ansna ional po abili y and ecip oci y o pension igh s.
44
Ge ing mo e om olun a y schemes. Co e age can also be expanded among in o mal wo ke s
by incen i izing olun a y pension sa ings in con ibu ion ma ching schemes (MDCs). The e is much
expe ience in he egion o in o m design o such schemes, hough co e age inc eases o da e in mos
MDCs sugges hey will no b idge he co e age gap on hei own. Design s a egies o MDCs include
(i) ensu ing adequa e and sus ained ma ching on con ibu ions; (ii) ensu ing lexible design o
accommoda e he low and ola ile incomes o in o mal sec o wo ke s; (iii) bundling e i emen sa ings
wi h sho - e m bene i s o inc ease p oduc appeal; (i ) simpli ica ion o know-you -cus ome
equi emen s o bank and mobile money accoun s; ( ) use o au o-en ollmen /au o-deduc ions/au o-
escala ion; ( i) eliance on con ibu ion agg ega o s; and ( ii) expansion o con ibu ion channels, in
pa icula use o mobile paymen s, pla o ms, and me chan s.
Pa ame iza ion o bene i s in con ibu o y schemes needs moni o ing. Beyond he common
challenge o co e age, he key challenges o con ibu o y sys ems a y acco ding o hei s uc u es
and design pa ame e s. DC egimes ac oss Asia and he Paci ic end o be sus ainable om a iscal
pe spec i e, bu ypically p o ide poo adequacy because o low con ibu ion densi y and gene ous
ea ly wi hd awal ules and, in many cases, p o ide only lump sums a e i emen which a e quickly
exhaus ed. In con as , mos DB schemes p o ide adequa e bene i s ac oss old age, bu in many
cases, ace sus ainabili y challenges because o demog aphic aging. To ensu e sus ainabili y and
main ain in eg i y o DB/NDC pension sys ems, au oma ic adjus men mechanisms need pa icula
a en ion and a e o en lacking in Asia and he Paci ic (wi h some excep ions, such as in NDC schemes
in se e al economies o he o me So ie Union). Con ibu o y schemes can play a ole in in e nally
edis ibu ing bene i s o low-income ea ne s and women, bu social pensions a e bes placed as he
main, edis ibu i e, po e y alle ia ion le e because o pa ial con ibu o y co e age in many
economies in Asia and he Paci ic.
Rule-based indexa ion o pa ame e s is essen ial o main ain adequacy and sus ainabili y o e
ime. While s anda d in OECD sys ems, many economies in Asia and he Paci ic lack o mal
indexa ion ules, which h ea ens adequacy and inc eases unce ain y o olde people. Clea
indexa ion ules, applied wi hin con ibu o y and social pilla s, a e i al o main ain he eal alue o
pensions (ideally based on communi y s anda ds), including by adjus ing eligibili y h esholds o
bene i eceip .
Women would bene i om a gende lens on pension design. Women ha e lowe o mal sec o
labo o ce pa icipa ion and lowe a e age wages, and mo e ca ee in e up ions e en when wo king
o mally. These ac o s combine o educe hei pension con ibu ions and ea nings- ela ed pensions.
They would bene i mos om an expansion in social pensions. In addi ion, a ange o con ibu o y
45
pension design pa ame e s could be be e designed o add ess gende issues, including (i) gene osi y
and o m o su i o bene i s; (ii) es ing pe iods and bene i s ha ake be e accoun o ca ee
in e up ions; (iii) use o mo ali y ables on annui ies ha do no disad an age women o hei longe
li e expec ancies; (i ) in e nal edis ibu ion in con ibu o y schemes; and ( ) e iewing di e en ial
pension access ages by gende ha esul in sho e ca ee s, ewe sa ings, and longe e i emen s.
Mains eaming digi al paymen s. Bene i paymen p og ams in de eloping economies a e
inc easingly making use o digi al and biome ic iden i ica ion, in o ma ion dissemina ion, and digi al o
mobile paymen mechanisms. These need o be mains eamed in pension collec ion and paymen .
Ad ances in in ech could allow inno a i e consump ion-based pensions whe e people mic o-sa e a
poin s o sale as hey make pu chases using digi al paymen s pla o ms.
Pensions can be designed o no discou age wo k. E idence sugges s whe e olde wo ke s can
e i e ea ly on pension-boos ed incomes, many choose o do so. To ensu e ha his does no
encou age ea ly e i emen , policymake s need o make su e ha pension access ages a e no oo
low and ha u u e inc eases a e au oma ically linked o li e expec ancy a e i emen age. O he
measu es should include he aboli ion o he equi emen o e i e o claim pension bene i s.
Pension sys em go e nance is challenging, bu good guidance can help. P omises and p ese a ion
o pension igh s mus su i e o long pe iods, s aining go e nance in any economy. In eme ging
economies, weak egula o y capaci y, shallow capi al ma ke s, lack o compe i ion in he und managemen
sec o , o poo ly managed inancial ins i u ions inc ease he go e nance challenges in pension sys ems.
Pension schemes should be designed wi h due accoun o hese go e nance sho comings. ISSA, IOPS,
and OECD guidelines a e help ul in his ega d. The guidelines include de ailed and ac ionable p inciples
ha a e ela ed o accoun abili y, anspa ency, p edic abili y, pa icipa ion and engagemen , and
dynamism wi h ongoing imp o emen s, as well as p agma ic ad ice on licensing o unds, isk managemen
p ac ices, und p ojec ions, use o al e na i e in es men s and de i a i es, and in eg a ion o en i onmen al
and social p inciples in in es men . While he long- e m p i a e sec o con ac s equi ed o pensions a e
a isk, e idence sugges s ha , in gene al, he popula ion us s p i a e business mo e han i us s
go e nmen s “ o do he igh hing.”
COVID-19 pandemic challenges will be dwa ed by he challenge o demog aphic change. Many
economies empo a ily adjus ed hei pension sys ems o mi iga e he impac on con ibu o s and i ms,
including educ ions, holidays, and de e men s in pension con ibu ions. DC schemes also allowed o
special ea ly wi hd awals. While sho - e m p essu es o special measu es in he ace o c ises a e
unde s andable, eme gency policies need o be e ac o in long- e m impac s on sys ems and
indi iduals as socie al aging accele a es and c ises o di e en o ms become mo e equen .
46
New beha io al insigh s can help policymake s guide be e inancial decisions o sa e s. I is
i al ha new coho s o long- e m sa e s and ising numbe s o e i ees make op imal inancial
decisions o and in old age. New beha io al inance insigh s sugges ha we can guide decisions
be e by (i) educing he choice se s (e.g., p o iding ewe bu highe quali y inancial p oduc s);
(ii) simpli ying suppo i e in o ma ion (e.g., making p oduc disclosu es ha in o m a he han
con use); (iii) adding nudging in o ma ion (e.g., ancho ing sugges ions and implici endo semen ); (i )
iming o decisions and eminde s; ( ) coaching he decision; and ( i) in he absence o choice,
p o iding ad an ageous de aul s o by ou sou cing o sha ing decisions wi h ad ise s and/o
echnology.
47
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