From gender gaps to vulnerable workers, inadequate pensions are an issue the world over. What are countries doing about it?

Around the world, many people are still without pension provision. Here, we explore this by looking at case studies of countries with significant coverage issues, and countries that are making changes to improve coverage.

Some of the major drivers and resulting effects of inadequate pension provision are:

The gender pensions gap – Figure 1 shows the gender pensions gap in OECD countries. The OECD average is 26%, meaning the average retirement income for women aged 65-plus in OECD countries is 26% below the average for men. Some countries are implementing measures to tackle this, both directly and indirectly
Net replacement rate (NRR) – A person’s pension divided by their pre-retirement earnings, on a net-of-tax basis. Figure 2 shows the expected NRR from mandatory and quasi-mandatory pension systems in OECD countries. The average is 61%.
Pension contributions: who’s missing out? – NRR data only shows the position of workers who have been in the labour market for their whole career and joined mandatory or quasi-mandatory pension systems. Many people are not in this position, and miss out on pension contributions. Figure 3 shows the proportion of the working-age population in mandatory funded pension systems (including funded state systems)
Low-paid and informal workers losing out – For people to have adequate, let alone decent, pensions, they need to be in a pensions system. Several countries have a large number of citizens who are not in a system, often casual or informal workers. World Economic Forum data shows that more than 2 billion people, or 25% of the world’s population, are employed in the informal sector, with women over-represented. Such work is often unregulated and not protected by the state, leading to low pay and exacerbating the gender pay and gender pensions gaps. Figure 4 shows the coverage of workers in various Asian and OECD countries
Africa: the missing pensions continent – Absence of pensions is a real concern in Africa. In the article ‘Pensions in Africa’ (2009), the OECD stated that one in five of the world’s poorest people live on less than one dollar a day and are over 60 years old. In some countries, only 5% of the population is in a pension system – and then usually only civil servants or higher paid workers in formal employment. As in other parts of the world, it is increasingly hard for elderly people to depend on family support, due to declining fertility rates and social pressures; elderly women are one of Africa’s most vulnerable demographics.
Communicating the problem, sharing examples and suggesting solutions could make a difference in pensions to millions, if not billions, of lives

Indonesia, the world’s fourth most-populous country, faces a demographic and pension crisis. Its population of 280 million is ageing rapidly, with the number of retirees expected to double to 69 million by 2050. Declining birth rates are weakening the traditional family support model; this is, in turn, putting pressure on the workforce and public finances.

The current pensioner-to-worker ratio is just 12%, far below the OECD average of 33%. As Indonesia’s working-age population shrinks and its number of retirees rises, the burden on its pension systems will grow sharply. Without reform, millions risk falling into financial insecurity in old age, threatening economic and social stability.

Indonesia’s pension system includes a state defined benefit scheme, Jaminan Pensiun, and a mandatory defined contribution scheme, Jaminan Hari Tua. Despite appearing generous, there are major issues:

More than 100 million informal workers lack pension coverage
More than 40% of retirees live in poverty
Early pension fund withdrawals erode retirement security
The Jaminan Pensiun system risks long-term insolvency.
The Indonesian government plans to raise the retirement age from 58 to 65 by 2043. However, further reforms are needed to ensure the sustainability of its pension system, and to expand coverage to informal workers.

More needs to be done to give coverage to low-paid and informal workers

Japan: implementing reform

Japan is implementing measures to improve pension outcomes for women, particularly parents of school-aged children and those over the age of 40 who care for elderly parents. A new reform will boost pensions for many part-time workers, helping to close gender pension gaps:

Since 1 October 2024, more part-time workers have had to be enrolled in the Employees’ Pension Insurance system
Previously, only employers with 100 or more employees had to enrol part-time workers; now, those with 50 or more must do so
Part-time workers who work 20-plus hours a week (meeting other conditions), and those working around 30-plus hours, must be enrolled
Government subsidies will offset costs for smaller employers.
More than a million workers are expected to benefit from these reforms, thus expanding pension access in the country, despite some exclusions remaining.

Mexico: improving women’s provision

The Mexican government has proposed a new non-contributory pension for women aged 60 to 64, expected to support more than 3 million older women who face economic vulnerability.

The pension programme, announced by president Claudia Sheinbaum last year, begins in 2025 and aims to provide a bimonthly pension of MX$3,000 through the Tarjeta del Bienestar (Wellbeing Card). The plan targets women aged 63 and 64, as well as indigenous and Afro-Mexican women aged 60 to 64, and prioritises areas with larger indigenous populations. The programme will expand gradually, with the goal of covering all women between the ages of 60 and 64 by 2026.

World pensions

26% the gender pensions gap in OECD countries
25% of the world’s population work in the informal sector
20% of the world’s poorest people are over 60 years old
87% of those over state pension age in low-income countries have no pension
Thailand: introducing change

Thailand, home to 72 million people, lacks a national pension fund, though a new Employee Welfare Fund will launch this October. Most of Thailand’s 40 million workers, especially its informal workers, lack private or employer-sponsored pensions. Civil servants receive government benefits, and some private employers offer voluntary plans. The Welfare Fund will provide basic protection for job loss or death, with contributions starting at 0.25% of pay.

The country’s plan for a National Pension Fund, proposed in 2008 with phased contributions rising to 10%, remains delayed. Due to high costs, the International Labour Organization has recommended postponing its implementation until broader national pension reform takes place.

How actuaries can help

Many countries are taking steps to improve coverage and provide pension credits or contributions for those unable to work. However, much more needs to be done to expand coverage to low-paid and informal workers. It is a massive challenge to provide adequate pensions for society’s poorest and most vulnerable, especially where there are large swathes of workers outside state and mandatory systems.

Increased life expectancies and lower fertility rates will mean that there will be far fewer workers to support elderly populations in the coming years, making the challenge more serious.

Actuaries everywhere can influence governments, legislators, employers and pension providers on the changes that can be made. We have good examples of new legislation from around the world that addresses these issues – some major, some small, but all driving change. Communicating the problem, sharing examples and suggesting solutions could make a difference in pensions to millions, if not billions, of lives around the world.

Read more @theactuary