By Richard Hinz, Robert Holzmann, David Tuesta, Noriyuki Takayama
Establishing robust, equitable, and effective social protection is essential to reducing poverty and boosting prosperity at all levels of development. The demographic transition that has already transformed most high-income societies will exert similar and growing pressures on others, reinforcing the role of pensions and savings for old age as a central pillar of social protection systems.
Despite this increasing imperative, achieving full coverage and adequate benefits within a financially sustainable pension system remains a difficult challenge for nearly every country. Some that had previously been able to provide generous benefits to earlier generations now face difficult reductions for future retirees and will need to establish supplementary elements of their systems to maintain adequate income for the elderly. Others must find ways to bring the dynamic and rapidly changing workforce
of a global competitive economy into their systems to maintain the promise of security in old age.
After decades of reform and innovation ranging from individual mandates to creative forms of tax incentives, coverage of pension systems often remains at less than half of the economically active population—in part because the incentives for contributing to pension savings are often obscure or irrelevant to those who need this protection the most: young and low-income individuals with irregular earnings and little attachment to the formal labor force. Traditional forms of tax incentives have little relevance to those not paying income taxes, and participation mandates are difficult to enforce in the informal sector.
One possible solution that has emerged in recent years that offers the potential to overcome this challenge is the provision of contribution matches to provide an immediate and powerful incentive for participation in pension saving systems. Originating in several high-income settings there are now a number of innovations and substantial experience in low-income countries in using this design to stimulate coverage and savings. This experience now provides a rich opportunity for learning, not just from the longer experience of a few high-income countries but also the more meaningful South-South learning across
developing countries.
This volume, which reviews the experience with matching pension contributions across the range of countries that have used the design, makes an initial, but critically important investment in this learning process. The description and analysis of this experience—which is the product of partnership and collaboration across many public and private institutions—provide an invaluable early assessment of the design to inform policy makers and practitioners as well as serve as a model for the kind of cooperation that will be required to address this difficult challenge. At the World Bank, we look forward to being part of this learning process of how to best provide old-age security for all.

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