Poverty and pensions: The rights of older people

Relatively rapid population ageing in poorer countries implies that unless policies and social protection schemes specifically address issues of old age poverty, targets for poverty reduction will not be achieved. Studies of poverty in old age reveal its multi-dimensional nature, including its persistence and its intergenerational impact.

Public policy on ageing in developing countries has tended to emphasise the welfare requirements of older populations, ignoring the wider dimensions of livelihoods in old age. The prevailing emphasis on pension schemes for formal sector workers and on individual contributions to pension funds, as outlined by the World Bank in 1994, excludes the majority of older people in poor countries who live and work outside the formal sector and lack the capacity to save. Basic non-contributory pension schemes, designed as an integral part of government poverty reduction programmes, are most likely to target the increasing numbers of poor older people and have an intergenerational impact within their households.

There is evidence that such non-contributory pension schemes, especially universal schemes, can have a significant impact on poverty reduction at family and community level. Economic evidence suggests that such measures are affordable even for the poorest countries. Willmore (2001) for example, in his study of existing schemes in Africa (Mauritius, Namibia and Botswana), calculates the cost to be between 0.4 to 2 percent of GDP. The overall cost to governments is to a large extent dependent upon political rather than economic decisions, and is determined by decisions about the benefits paid and criteria for eligibility.

A brief overview by HelpAge International of a number of participatory research studies with poor older people provides some evidence of their survival strategies and points to the potential of non-contributory pensions to contribute significantly to poverty reduction. They also suggest that non-contributory pensions encourage household economic activity by strengthening the contributions of older people.

This research on older people’s livelihoods provides evidence of their substantial social and economic contributions to the household and community. Recent studies in communities in Tanzania and Mozambique (HelpAge International, 2000) demonstrate the variety of income generating and non-income generating activities carried out by older people. These contribute to a fragile household support system which older people in turn depend upon. The Tanzania study reports that income derived from these activities was used by the family, primarily for paying school fees. The findings suggest that minimal but guaranteed and regular income in old age will have important intergenerational and anti-poverty effects. Future research must serve the policy imperative to develop feasible and effective social security measures for older people and to protect the rights of older people to equal participation in the benefits of development.

Research in South Africa, in poor rural and urban communities with high unemployment rates, found older people's pension income supporting several household members. Spending priorities were school fees and household food. However, pension income alone may not guarantee that basic needs of older people are met. The same study found that older people face severe problems accessing health care services, particularly highlighting the poor treatment by health staff. This evidence strongly suggests that universal non-contributory pensions or old age cash payments provide a core component of old age support, but that this must be complimented by policies ensuring equal access to employment, family support and healthcare.

Emerging evidence from other sources – Willmore (2001) and Devereux (2001), for example – suggests that for poorer countries, making universal minimal cash payments to older people is an economic possibility, especially as a component of national poverty reduction or social security systems. Older people's capacity to contribute to household well-being and to poverty reduction within communities is well documented. Policy initiatives aimed at poverty reduction, targeted through older people in the form of non-contributory pensions, cost poorer countries no more than richer countries in terms of percentage of GDP. What determines the proportion spent on pensions are political decisions regarding eligibility and benefits.

HAI takes a rights-based approach to development, and its mission is to work with and for disadvantaged older people worldwide to achieve a lasting improvement in the quality of their lives. At the recent 2nd World Assembly on Ageing, held in Madrid in April 2002, 159 participating governments signed a Plan of Action on Ageing and issued a political declaration. These commit governments to extending the ‘right to development’ to older people, halving old age poverty by 2015, ending age-based discrimination, and including older people in national and international frameworks – such as the Millennium Development Goals and the Poverty Reduction Strategy Processes – designed to combat poverty. The implications for pensions policy in the South of implementing the rights of older persons need urgent consideration.

Further research is needed on existing non-contributory pensions and grants to older people, focusing both on their impact on wider poverty reduction and the well-being of older people. This will also require governments and civil society to adopt a broader approach to social security for older people.

Source(s):
‘Strengthening Village and Neighbourhood Organisations: Safety Networks for the Vulnerable’, HelpAge International, Dar es Salaam, 2000
‘Universal Pensions in Low-income Countries’, paper prepared for the annual meeting of the International Association of Pension Fund Organisations, Costa Rica, by I. Willmore, November 2001
‘Capacity and Connection: A Study of Ageing in Mozambique’, HelpAge International, Maputo, G. O'Donaghue, 2001

Funded by: HelpAge International

id21 Research Highlight: 24 June 2002

Further Information:
Mandy Heslop
HelpAge International
1st Floor, York House
207-221 Pentonville Road
London N1 9ZN, UK

Tel: +44 (0)20 7278 7778
Fax: +44 (0)20 7843 1840
Contact the contributor: mheslop@helpage.org

HelpAge International

Other related links:
'The State of the World's Older People 2002', HelpAge International, 2002

'Livelihoods and coping strategies of older people: The role of non-contributory pensions in the developing world', HelpAge International, 2002

'Social Pensions in Namibia and South Africa', IDS Discussion Paper 379, UK by S.D. Devereux, 2001

'Pensions for life? The rise of pensions as a development issue', Insights #42

See id21's further links on pension issues

More on the 2nd World Assembly on Ageing, held in Madrid in April 2002