Let’s not just talk pensions
G20 Summit

Let’s not just talk pensions

Joachim Breuer, president of the International Social Security Association, calls for immediate and decisive action on demographic change and social security

There is a common misconception about demographic change: many people assume that the challenge of an ageing population lies in preparing the social infrastructure – in particular the system of social security – for growing numbers of pensioners. The problem with this assumption is that it narrows our perspective of the options we have for dealing successfully with demographic ageing.

As a consequence, most public debates about the future of social security in a greying world centre on adjusting the main parameters of old-age benefits: the size of pensions and the age of retirement. Discussing these parameters is not a mistake. They are important factors affecting the sustainability of social security. However, focusing on them exclusively means turning a blind eye to policy measures that are important to all age groups and that might help to solve some of the problems created by population ageing. From my point of view, three policy options are crucial in this context: expanding coverage, investing in prevention and return to work, and offering solutions for long-term care.

Expanding coverage

As populations around the world age, the ratio between the number of persons of working age (20–64) and the number of older people who may depend on others’ support decreases. Although this old-age support ratio gives us a good idea of the necessary increase in productivity if fewer workers are to finance the livelihood of more pensioners, it describes only a part of the picture when it comes to social security. Why? The ratio between workers and pensioners tells us nothing about the legal and structural relationship between both groups. To find out how many workers actually do support one retired person, we must consider the dimension of coverage. According to the ISSA’s report on the 10 global challenges for social security, only half of the world’s population has access to old-age benefits. Vast proportions of the global population either do not receive any form of financial support (other than through their families) or do not earn some form of credit towards such support later in their lives. It is obvious that this situation serves the needs of neither the older nor the younger generation. This is why closing the coverage gap must be a priority for political decision makers everywhere.

Investing in prevention and return to work

Fewer workers per pensioner also means that the full potential of workforces must be activated. Against this backdrop, health investments need to be considered as a key component for creating not only healthier but also more inclusive and more productive societies. In many countries, efforts are underway to increase health promotion and to improve access to structured and coordinated healthcare services. Support of employment is equally important. The longer a person remains away from work, the higher the risk of being excluded from the labour market and requiring long-term social security benefits. Such policies offer a positive return on investment for older workers and especially for younger workers, because the net impact of prevention and rehabilitation multiplies with every additional year of active labour market participation. Therefore, governments should examine their policies regarding incentives and impediments to promoting health and returning to work, and revise them accordingly.

Offering solutions for long-term care

Projections by the World Health Organization show that the need for long-term care will increase dramatically over the next few decades. As the number of children per family decreases and concepts of family and women’s role in society change, new models of delivering and financing long-term care must be developed and implemented. Families will always share the burden of caring – which means professionalising care for the elderly and building schemes that are instrumental for financing the corresponding benefits.

At the global level, closing the coverage gap, investing in prevention and return to work, and providing a stable basis for long-term care are among the measures that G20 governments should consider in the context of population ageing. ISSA, with more than 320 members from over 150 countries, provides a network of expertise and experience in designing and managing social security schemes that can contribute solutions to the problems and challenges on the G20’s agenda.