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Older people benefit worldwide from the rise of social pensions

Despite demographic challenge, 2014 Global Age Watch Index says financial conditions have improved for the elderly

Many nations bracing for a demographic tidal wave of older people are scrambling to create pensions that provide some financial security in old age.

Only half the world’s population now can expect to receive even a basic pension in their later years, according to the 2014 Global Age Watch Index, released today to coincide with the United Nations International Day of Older Persons.

But in a dramatic shift in policy, many countries are creating universal pensions for their old, the report found. In more than 100 countries that have established social pensions, financial conditions for older people have improved dramatically.

“Some countries have really seized the mantle,” said Toby Porter, chief executive of HelpAge International, a nonprofit that produced the annual study, which ranks 96 countries on the social, physical and economic well-being of their elderly. “Brazil, Chile, China and Mexico are showing that it’s possible … The rise of social pensions signals a shift in thinking.”

The world’s 868 million people over 60 make up almost 12 percent of the global population. By 2050, the 60-plus population is projected to rise to more than 2 billion, or 21 percent. There will be almost as many people over 60 as children under 15.

“The unprecedented rate and speed of population aging presents policymakers with a challenge,” Porter said.

Norway ranked as the best place overall for older people and was also ranked first in income security. The worst places for the elderly were Afghanistan, Mozambique, the West Bank and Gaza Strip and Malawi. Half the countries with poor results on income security and health status of its older residents are in Africa. (Mauritius, ranked eighth best for income security, was the exception, since it has a universal noncontributory pension for people over 60.) The situation is also grim in Venezuela, Serbia and Turkey.

Chile is one of several countries dealing with its aging population by expanding social pensions.
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The United States may be the wealthiest nation, but it ranks eighth overall for its elderly and 22nd in their income security and 28th in their health status.

“It’s hard to talk about pensions without talking about poverty,” said Bethany Brown, HelpAge USA policy director.

In 2014 the poverty threshold in the U.S. is $11,670 for individuals. “Nine percent of Americans 65 and older live below that line,” Brown said. “And that doesn’t include the health care cost. At the other end of the spectrum, you also have older people who are the best off in our society. It’s this inequality that becomes magnified in old age.”

The average health care spending of a household on Medicare can be as high as 16 percent of total household spending, according to a Kaiser Family Foundation report.

“And 20 percent of them have incomes below $15,000 a year,” said Sandy Markwood, chief executive of the National Association of Area Agencies on Aging. “Fifty percent were below $24,000. What you’ve got is a lot of people living really, really close to the poverty level … A lot of people are one health instance away from going over the edge.”

Aging agencies across the country are reporting repeat callers looking for assistance, but many communities don’t have the services to support demand, she said. “Local area agencies have waiting lists for all their services,” Markwood said.

‘What you’ve got is a lot of people living really, really close to the poverty level. A lot of people are one health instance away from going over the edge.’

Sandy Markwood

National Association of Area Agencies on Aging

HelpAge advocates for minimum pensions for all to help lift older people out of poverty.

Social pensions (universal noncontributory citizen’s pensions) provide financial support to older people regardless of whether they have worked and paid taxes. Contributory pensions are based on how much workers have paid in to the system. The U.S. Social Security system is a hybrid of the two.

In low- and middle-income countries, more people — many of them women — work off the grid in informal jobs for most of their lives and are not likely to pay into or, as a result, benefit from contributory pension systems.

Mexico expanded its social pension in the past decade, and now nearly 9 out of 10 Mexicans age 65 or older are covered. As a result, Mexico’s income security ranking jumped up from 70th to 34th in one year. China introduced a rural social pension in 2009 that reaches 133 million more people, or 16 percent of the world population over the age of 60. Bolivia’s Dignity Pension for everyone over 60 has led to increases in school enrollment and drops in child labor for households with an older person.

The report found that even poor countries can afford providing pensions to all seniors. The cost of a universal pension for people over 65 at a level equal to 20 percent of average income would range from 0.4 percent of GDP in Burkina Faso to 1.8 percent in China. Social pensions in most European Union countries do more to reduce inequality than all other tax or benefit systems, Porter said.

“Social pensions are a game changer for older people,” he said. “Rising numbers of older people mean governments need to radically rethink their approach to later life.”

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