25 Sep, 2012 10:17:55
Asia's pension systems unable to meet needs of aging population: ADB
September 25, 2012 (LBO) – A new book launched by the Asian Development Bank has shown that pension schemes in most developing Asian economies have failed to meet the needs of a rapidly aging population as globalization breaks down traditional family support systems for elders.
"Across Asia, great divides exist in pensions available in rural and urban areas, between retirees from the public and private sectors, and those leaving the informal and formal job sectors," said Donghyun Park, ADB's principal economist.
Park is also the editor of the book 'Pension Systems in East and Southeast Asia: Promoting Fairness and Sustainability'
"Without far-reaching reforms, the financial burden of these schemes on future workers may become more than they can bear," Park has said.
The book attributes Asia's youthful population as one of the key pillars of economic success in the region but warns that the working age group is gradually on the decline with falling fertility rates and rising longevity.
"Asia’s median age is rapidly becoming older," the ADB said.
The book says pension systems need to be fair in coverage, net benefits, retirement age and also be financially sustainable to assure pensioners that the benefits promised are delivered.
It urges Asian policymakers to give sufficient old-age income support and offer lessons from China, Indonesia, Korea, Malaysia, Philippines, Singapore, Thailand and Vietnam.
In China for example, where the number of elderly already surpasses the combined total of senior citizens in Europe, multiple pension systems cover urban enterprises, rural dwellers and civil servants.
The book says such schemes need to be rationalized to create a balanced, sustainable pension framework.
In Indonesia, the existing system reportedly only covers 14 percent of all private formal sector workers, and the ADB says pension programs will have to expand by more than 700 percent to cover both formal and informal sectors.
Singapore, by comparison, has a single-tier pension system with nearly universal coverage. However average funds per member is likely to be insufficient as the population ages in the next 20 years, ADB said.
The book also highlights the roles that changing social norms and globalization are playing in the need for pension reforms.
The book also explores the breakdown of family-based old-age support mechanisms.
An Asian culture of children support their elderly parents are breaking down, particularly as globalized labor markets trigger a surge in migrant workers, the ADB said.
The book says strong social protection systems, including pensions, can mitigate the insecurity that globalization brings.