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This paper reviews the most important challenges to old age income systems in the region and examines opportunities for their design or reform. While covering all the region’s countries in principle, the paper concentrates on those for which there is a strong knowledge base (China, Hong Kong, Indonesia, Korea, Mongolia, Malaysia, Singapore, Thailand, the Philippines and Vietnam). The text, tables and annexes variably include partial coverage of Brunei Darussalam, Papua New Guinea and Taiwan ROC, while they mostly do not address some transition economies due to scarcity of information (Lao PDR, Cambodia, and Myanmar). The main concern of the analysis is retirement income provisions.

With the recovery from the recent crisis, countries of the East Asia and Pacific region are rethinking their financial and social policy, including old-age protection. Population aging, in combination with ongoing urbanization and economic transformation, will place increasing pressure on traditional family care arrangements. Coverage under formal pension systems is generally low, and the absence of social safety nets for the needy elderly poses risks in the face of breaks in the economic growth path.

In addition to common systemic challenges, formal old-age income support systems confront issues specific to their design type:

• the national provident fund and social security-style systems with reserve funds have demonstrated problems with investment policy and performance, governance and management
• in the established market economies, social security-type systems are fiscally unsustainable in the long run and often have a weak benefit-contribution link
• these types of systems encounter additional problems in transition economies, including low contribution collection from previously socialized enterprises and rising benefit take-up, partly as a consequence of the policy response to labor market disequilibria

Despite the formidable reform agenda, countries have abundant opportunities to address these issues, and the low level of coverage, predominance of retirement schemes still in evolution and existence of funded provisions in many countries provide an environment conducive to reform.

Options involve

• avoiding mistakes (adopting an integrated view on retirement income provision, balancing individual equity and social equity with efficiency considerations, averting fiscal unsustainability and integrating public and private sector pensions)
• being innovative (moving toward a multipillar structure, prudently extending coverage, trying new approaches to reduce administrative costs and extending social risk management through informal support and safety nets); and
• fostering financial markets (decentralizing pension fund management; reviewing governance, regulation and supervision; and creating or supporting the provision of new instruments)

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