Changes in pension policy will need to be accompanied by policies to increase labor market flexibility so as to encourage older workers to remain in the work force. Such policies include incentives for employers to provide lifelong learning and training specifically geared to older workers, and make workforce adaptations which allow older workers to retain a high level of productivity. In some countries, benefits will need to be streamlined to provide workers with basic benefits that ensure that they do not fall into poverty, but may not be sufficient to fully maintain the living standard they enjoyed while working.
Tax and social protection systems need to encourage workers to save for a more generous level of retirement benefits than can be provided by the public system, if they desire more benefits in retirement. To that end, governments can encourage the financial sector to provide relevant savings instruments, while ensuring adequate transparency and regulation so that individuals have the opportunity to undertake additional savings without exposing themselves to unknown risks.
Governments may also need to re-examine the efficiency of their revenue administration systems to help finance not just pensions, but all other societal needs. This book goes into each of these accompanying policies, but concludes that none of these by itself can address the impact of the demographic challenges that are underway. A combination of policies will be required to effectively face the challenges.
The inverting population pyramid clearly presents challenges to the provision of old age security, but consistent policy choices to return the pension system to parameters similar to those in the 1970s can result in sustainable systems of old age security. But this means that governments need to communicate to the population at large that the growth in generosity experienced in the past 100 years will not be able to continue and will in fact need to be rolled back somewhat.
Full report
© World Bank
Key
Hover over the blue highlighted
text to view the acronym meaning
Hover
over these icons for more information
Comments:
No Comments for this Article