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Role of Old Age Pensions in Reducing Poverty
September 4, 2003
can help to reduce and prevent poverty among older people and their
households in developing countries, according to evidence from a new
research study, which compares and examines the impact of non-contributory
pension programmes in Brazil and South Africa. The joint project was
undertaken by researchers in the UK universities of Manchester and East
Anglia, universities in Brazil and South Africa, and HelpAge
The role of old age pensions in reducing poverty
Non-contributory pensions can help to reduce and prevent poverty among
older people and their households in developing countries, according to
evidence from a new research study, which compares and examines the impact
of non-contributory pension programmes in Brazil and South Africa.
The joint project was undertaken by researchers in UK universities of
Manchester and East Anglia, universities in Brazil and South Africa, and
Old age poverty is widespread in developing countries, and informal old
age support from families and communities is coming under increasing
pressure from adverse economic conditions, migration, HIV/AIDS, and
changes in household composition.
If new policies are not found to support older people and their
households, they will continue to swell the ranks of the poor.
Pensions play a key role in old age support systems, but research and
debate on pension policy in developing countries has so far focused on
contributory pension programmes, which only reach a small proportion of
older people. Non-contributory pension programmes are only established in
a handful of developing countries, but these are more likely to reduce
poverty and vulnerability and facilitate economic development, the study
The research shows that:
* In Brazil and South Africa, pension benefits are shared within
households, so that they act as household cash transfers channeled through
* Non-contributory pension programmes have a clear impact on poverty,
significantly reducing the probability that individuals in households
where there is a pension recipient will be in poverty.
* These programmes reduce household vulnerability. Households with a
non-contributory pension recipient show greater financial stability and
lower probability of experiencing a decline in living standards.
* Non-contributory pension programmes can promote wellbeing in older
people. Preliminary analysis of a range of deprivation indicators shows
that pension recipients have a lower incidence of a range of deprivations,
especially in urban areas.
* In Brazil and South Africa, non-contributory pension programmes reach a
large number of poor older people (5.3 million in Brazil and 1.9 million
in South Africa) at relatively low cost (1 percent of GDP in Brazil and
1.4 percent in South Africa). They are financially sustainable and attract
a large measure of political support.
The researchers also conclude that the Millennium Development Goals for
the eradication of severe poverty are unlikely to be achieved without
urgent consideration being given to establishing and extending
non-contributory pension programmes. In low-income countries, with a
limited tax base and a lack of an effective administrative structure, the
introduction of such programmes will require international support, they
* Non-contributory pensions and poverty prevention? A comparative study of
Brazil and South Africa Final Report, DFID Project R7897 Pensions and
Poverty Prevention, July 2003, London.
University of Manchester: http://idpm.man.ac.uk/ncpps/
HelpAge International http://www.helpage.org/publications/PapersEtc/PapersEtc.html
© 2002 Global Action on Aging
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