The World Bank’s Social Protection and Jobs Global Practice, in collaboration with the ASPIRE team and informed by research from the International Labour Organization (ILO) and the United Nations Department of Economic and Social Affairs (UN DESA), delivers a timely and comprehensive report. This document scrutinizes the global state of pension and social insurance systems, offering insight into their adequacy, sustainability, and coverage in a world experiencing rapid population aging. As the share of elderly citizens rises sharply across nearly all regions, the need to reform outdated pension structures becomes more urgent, especially in countries where aging is outpacing economic development.

Aging Before Getting Rich

A major theme of the report is the accelerating pace of aging in the developing world. While Europe and Central Asia currently have the highest proportion of elderly people at 15.4 percent, by 2050, nearly every region, except Sub-Saharan Africa, is expected to match or surpass this level. Countries in South Asia and the Middle East, for instance, are undergoing demographic transitions at speeds far exceeding those experienced by developed nations. Unlike OECD countries that became wealthy before aging, many developing countries are growing old before becoming rich, raising concerns about the ability of their pension systems to provide security to a rapidly expanding elderly population. This demographic shift will place unprecedented pressure on fiscal systems, labor markets, and existing social safety nets.

Contributory Systems: Exclusive by Design

Contributory pension schemes, typically designed for workers in formal employment, remain the foundation of most national pension systems. However, the report shows how their design inherently excludes large segments of the workforce, especially in low- and middle-income countries with high labor informality. In Sub-Saharan Africa, contributory coverage reaches only 10.8 percent of the labor force, compared to over 70 percent in Europe and Central Asia. In countries with fragmented systems or programs restricted to civil servants, the reach is even narrower. Furthermore, even among those contributing, many do not meet vesting requirements due to job interruptions or short work histories, often leaving women and informal workers without support in old age. To address this, several governments have begun expanding voluntary pension options tailored to the informal sector, such as Rwanda’s Ejo Heza, India’s Atal Pension Yojana, and Kenya’s Haba Haba. These schemes allow flexible contributions and sometimes offer state subsidies, but their uptake and sustainability remain inconsistent.

Social Pensions: A Growing Safety Net

In response to the limitations of contributory systems, countries have increasingly turned to non-contributory or social pensions—benefits provided based on age and vulnerability rather than work history. Since 2000, 31 countries have introduced such programs, especially in Latin America and Sub-Saharan Africa. These pensions offer a modest but vital safety net for elderly people without access to formal retirement benefits. Although generally less generous than contributory pensions, averaging below 20 percent of GDP per capita, they play a significant role in poverty reduction and income support. In Sub-Saharan Africa, social pensions reduce poverty by an average of 17.4 percent, compared to just 2.2 percent by contributory schemes. Countries such as Bolivia and South Africa use social pensions to extend support to a broad elderly population, while others like India and Bangladesh target specific vulnerable groups. However, the fiscal sustainability of expanding such schemes remains a concern as aging accelerates, raising the need for careful targeting and integration with broader social protection strategies.

Adequacy and Gender Gaps

Beyond coverage, the report emphasizes the importance of pension adequacy. Benefits must not only exist—they must be meaningful. In regions like Europe and East Asia, contributory pensions make up more than 40 percent of household welfare, reflecting their importance in securing income during retirement. However, in many low-income countries, benefit levels are too low to prevent poverty or smooth lifetime consumption meaningfully. This issue is particularly acute for women, who often face systemic disadvantages in pension systems. Due to lower earnings, longer life expectancy, and time spent on unpaid care work, women receive lower benefits and are less likely to meet contribution thresholds. The report suggests gender-sensitive policy measures, such as reducing vesting periods, ensuring survivor benefits, and expanding non-contributory pensions to mitigate this imbalance. Notably, women are already the majority of pension recipients in several countries, often due to their longevity, which makes ensuring pension adequacy and inflation-indexing all the more critical.

A Sustainability Reckoning Ahead

One of the most striking findings of the report is the long-term unsustainability of many defined benefit (DB) pension schemes. Using simplified actuarial models, the authors reveal that in most regions, excluding Europe and Central Asia, the benefits promised by DB plans far exceed the contributions currently being collected. On average, benefits are 50 to 100 percent higher than what contribution rates can support, creating a major fiscal imbalance. The situation is particularly dire in systems that cater to public employees, where benefits are often generous and not properly funded. These schemes will require either higher contributions, reduced benefits, delayed retirement ages, or significant government subsidies, none of which are politically easy. Europe and Central Asia, which have already undertaken difficult reforms, stand out as exceptions with more balanced systems. Still, even in these countries, rising longevity and declining fertility will require ongoing adjustments.

The report concludes with a clear call for pension systems to adapt proactively to demographic and labor market transformations. Policymakers must shift from patchwork reforms to comprehensive strategies that address coverage, adequacy, and sustainability together. International experience offers valuable lessons, but pension systems must ultimately be tailored to each country’s demographic and economic reality. Without such reforms, the growing demands of an aging population could overwhelm fiscal resources and undermine the social contract. As the world rides the demographic wave, the future of retirement security depends on the decisions made today.

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