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Some related articles :Pension Limit Ignores Inflation Impact (June 2002)

Pension in Development Stimulating Dialogue?

By: Roger Charlton & Roddy McKinnon
 Insights, June 2002

There is now a substantial accumulation of evidence from the pension reform experiences of middle income countries over the past two decades, allowing for an evaluation of their outcomes. Findings from this evaluation lead to important lessons, both positive and negative, for developing countries.

Contrary to the current pension reform policy 'orthodoxy' led and financed by the World Bank, the key implication to be drawn from cumulative evidence from pension reform is the continued salience of the dominant role of public management in the provision of old age protection. What has increasingly become a pensions reform monologue should now become a more inclusive dialogue on policies and institutions.

World Bank dominates
'Pensions in Development' (2001) analyses in some detail how during the 1990s, the World Bank inexorably assumed the role of the dominant international advisory organization in the field of old age pensions policy. Displacing the Geneva Institutions, the International Labor Office (ILO) and the International Social Security Association (ISSA) and supplanting their role in standard setting and policy advice, the World Bank has been instrumental in promoting the international expansion of private individual retirement savings accounts at the expense of conventional risk-pooling public social security.

The dominant international advisory position occupied by the World Bank and its zealous promotion of a seemingly one-size-fits-all model for pension reform has crystallized into what can only be described as a global pension reform monologue. It has become increasingly difficult for voices critical of the Bank's policy agenda to make themselves heard in international arenas. Yet the available evidence, presented in detail in 'Pensions in Development', gives little support to either the developmental or welfare efficacy of key elements in the Bank's market-based pension reform strategy.

Alternative reform
This research challenges the institutional and policy implications of the Bank monologue and offers a state-based alternative reform agenda. In contrast to the Bank's overly narrow financial market focus, we conclude that the national development needs of low- and middle-income countries would be better served by pension schemes designed and balanced more strategically to secure social welfare aims and to serve economic development agendas.

There are limitations in both market-based and contributory social insurance pension schemes in meeting the social protection needs of the growing number of informal sector workers in developing countries. Our proposal is based on existing examples of good practice, pays particular attention to issues of cost and administrative feasibility, and advocates the adoption of mechanisms to achieve universality in coverage. It includes providing at least a minimal cash income on a regular basis to all the elderly as a policy priority. This prioritization is overtly intended to meet the social protection needs of the world's growing elderly population, including the most marginalized among them, the numerous elderly poor in developing countries currently without 'pensions' or other means of cash support.

A New dialogue
At the international level, we argue for the need to secure a more inclusive dialogue on the issue of old age pensions. This could be achieved by the establishment of a new international advisory regime with a mandate that is

more policy inclusive, encompassing all available pension reform and restructuring options

more inclusive of all the interests, including domestic ones, that should legitimately be involved and

sensitive to relevant domestic constraints and opportunities.

The intended outcome of such an advisory system is an enhanced likelihood of forming a consensus among all relevant pensions policy stakeholders for developing fiscally sound and administratively sustainable systems of income provision for all the elderly within developing countries

Roger Charlton
School of Social Sciences
Cowcaddens Road
Glasgow Caledonian University
Glasgow G4 0BA
UK

T +44 (0)141 331 3161

R.Charlton@gcal.ac.uk

Roddy McKinnon
International Social Security Association
4 Route de Morillons
Geneva 22
CH-1211
Switzerland

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