Non-contributory pensions and poverty prevention: a comparative study of Brazil and South Africa

Pensions play a key role in old age support systems, but research and debate on pension policy has so far focused on contributory pension programmes. Noncontributory pension programmes can be found in only a handful of developing countries although these are more likely to have an impact upon poverty and vulnerability and facilitate economic development.

This research project analyses non-contributory pension programmes in Brazil and South Africa, the two developing countries with the largest programmes. The research aims to provide evidence of the impact of these programmes upon the wellbeing, participation and security of older people and their households; and to identify lessons for other developing countries, and low income countries in particular.

The main findings emerging from the research are:

• in Brazil and South Africa, pension benefits are shared within households, and non-contributory pension benefits should be considered more appropriately as household cash transfers tagged on older people
• non-contributory pension programmes have a significant impact on poverty. In the absence of non-contributory pension programmes, the poverty headcount and the poverty gap would be appreciably higher for households with older people. The impact on the poverty gap is much larger for the poorer households. The programmes significantly reduce the probability that individuals in households with a pension recipient will be in poverty
• non-contributory pension programmes reduce household vulnerability. Households with a non-contributory pension recipient show greater financial stability and lower probability of experiencing a decline in living standards
• non-contributory pension programmes promote functionings in older people. Preliminary analysis of a range of deprivation indicators shows that pension recipients have a lower incidence of deprivations, especially in urban areas
• in Brazil and South Africa, non-contributory pension programmes reach a large number of poor older people (5.3 million in Brazil and 1.9 million in South Africa) at relatively low cost (1 per cent of GDP in Brazil and 1.4 per cent in South Africa). The programmes are financially sustainable and attract a large measure of political support

The evidence from this study suggests that extending non-contributory pension programmes to other developing countries could have a significant impact on reducing poverty and vulnerability among households with older people. In low income countries, with a limited tax base and a lack of an effective administrative structure, the introduction of non-contributory pension programmes will require international support. [authors' suimmary]