Transcript Document

Evaluation of Retirement Systems
of Countries within SADC
- OPM for FinMark Trust, DSD & ISSA
Overview and findings
John Kruger and Boipuso Modise (OPM South Africa)
24 May 2011
Centre for Social Development in Africa, Johannesburg
1
Outline
•
•
•
•
•
Background to the Study
Methodology and Approach
Review of Components by Country
Challenges and Responses
Conclusions
2
• Background to the Study
3
Africa and SADC
•
4
15 Diverse Countries …
HDI
rank
Country
Total
population
Urban
population
Life
expectancy at
birth
GDP per
capita
Population
below income
poverty line
(millions)
% of total
(years)
(PPP US$)
$1.25 a day
2007
2010
2007
2007
2000-2007
Gini index
57
Seychelles
0.1
55.3
...
16,394
...
…
81
Mauritius
1.3
42.6
72.1
11,296
...
…
125
Botswana
1.9
61.1
53.4
13,604
31.2
61
128
Namibia
2.1
38.0
60.4
5,155
49.1
74.3
129
South Africa
49.2
61.7
51.5
9,757
26.2
57.8
142
Swaziland
1.2
25.5
45.3
4,789
62.9
50.7
143
Angola
17.6
58.5
46.5
5,385
54.3
58.6
145
Madagascar
18.6
30.2
59.9
932
67.8
47.2
151
Tanzania (URT)
41.3
26.4
55.0
1,208
88.5
34.6
156
Lesotho
2.0
26.9
44.9
1,541
43.4
52.5
160
Malawi
14.4
19.8
52.4
761
73.9
39
164
Zambia
12.3
35.7
44.5
1,358
64.3
50.7
172
Mozambique
21.9
38.4
47.8
802
74.7
47.1
176
Congo (DRC)
62.5
35.2
47.6
298
59.2
44.4
1012
Zimbabwe
12.4
38.3
43.4
...
...
50.1
Source: United Nations, Human Development Report 2009
5
…ageing populations … and large proportion of
informal employment
Country
Population
2010
No of
60+
2010
No of 60+ as % of 60+ as % of
Old age
Old age
60+
population population dependency dependency
2050
2010
2050
2010
2050
Angola
19,082
748
3,338
4%
8%
5%
Botswana
2,007
124
326
6%
13%
6%
Congo, DRC
65,966
2,794 10,771
4%
7%
5%
Lesotho
2,171
137
254
6%
9%
7%
Madagascar
20,714
979
4,888
5%
9%
6%
Malawi
14,901
735
2,555
5%
5%
6%
Mauritius
1,299
142
400
11%
29%
10%
Mozambique
23,391
1,192
3,606
5%
7%
6%
Namibia
2,283
129
482
6%
13%
6%
Seychelles
n/a
n/a
n/a
n/a
n/a
South Africa
50,133
3,694
8,401
7%
15%
7%
Swaziland
1,186
62
140
5%
8%
6%
Tanzania, UR
n/a
n/a
n/a
n/a
n/a
Zambia
13,089
616
1,882
5%
4%
6%
Zimbabwe
12,571
750
2,556
6%
12%
7%
SADC (excl. Seychelles & Tanzania)
228,793
12,102 39,599
5%
8%
6%
Old-age dependency ratio: population aged 65 years divided by the population aged 15-64 mulitplied by 100.
Source: UN Population Prospects 2010 revision, medium variant
8%
12%
7%
8%
10%
6%
36%
7%
13%
n/a
15%
7%
n/a
5%
11%
9%
• Methodology and Approach
7
Aims of the Study
“a comprehensive review of retirement systems and
informal mechanisms of all SADC countries”
-“describing the retirement systems of each country with
a view to understanding the effectiveness and
coverage in different systems and the importance of
informal approaches to long-term provision”
8
Outputs and Study Challenges
• Outputs
– Literature review
– Country Profiles (system summary, socioeconomic context, review of each sub-system)
– Synthesis Report
– Key documents and analysis (policy documents,
legislation, system descriptions, assessments – by
country and general literature)
• Study challenges
– Background and socio-economic context
– Basic rules of the game
– Data
9
Five Components of a Retirement System
Social
Civil Service
Insurance
Occupational
Informal
Systems
Formal
Private
Occupational
and Voluntary
System
Social
Assistance
Criteria & components investigated:
• Formal
– Legal and institutional set-up;
– Coverage;
– Financing (mechanism and
quantum);
– Quality (contingencies,
benefits, protection of rights,
sustainability and risks, reform
initiatives)
• Informal:
– long-term savings
– asset accumulation
– other informal support (kinship
networks, community
organisations)
10
• Review of Components by Country
11
6 countries with social assistance targeted at elderly
(social old age pension)
Qualification age:
60 years (4 countries)
65 (Botswana)
70 (Lesotho)
Universal in 4 countries;
means-tested in 2
(although not clear that
Swaziland applies means
test in practice)
A guaranteed income to
elderly - broadly adequate
to sustain recipients above
the poverty line
Botswana
Lesotho
Mauritius
Namibia
South Africa
Swaziland
Cost ranges from:
•0.3% of GDP in Botswana to
1.8% in Mauritius
•0.7% of government
expenditure in Botswana to
7.9% in Mauritius
In other countries, a range of
social assistance schemes
support the elderly, even though
not specifically targeted at
elderly. They have limited and
uneven coverage (often donorfunded)
Key Issues:
•Fiscal cost and sustainability
•Administration and payment mechanisms
•Level of benefit and age group targeted
•Universality versus targeting
•Claims of other vulnerable groups: children
and unemployed; limit on extension of
pensions?
12
Social Pensions (Social Assistance)
Country
Botswana 2009
Lesotho
Mauritius 2008
Universal/
Age
eligibility Means Tested
65+
70+
60+
60+
Namibia
South Africa 2009/10 60+
60+
Swaziland 2009
Universal
Universal
Universal
Universal
Means Tested
Means Tested
No of
beneficiaries
90,639
80,000
136,408
100,000 (2005)
2,534,082
60,000
Coverage
Amount paid
(Monthly)
% of
population
over 60
% of age local cur. US $
eligible
$31
88% of 60+ P220
$38
86% M 300
104% Rs2,802 $100
5.4%
7.7%
9.0%
$56
$135
$25
5.6%
7.5%
6.2%
85% N$ 450
68% R1,080
95% E 200
Cost as
% of
GDP
Cost as % of
Government
Expenditure
0.7%
3.6%
7.9%
0.3%
1.6%
1.8%
3.6%
1.3%
0.8%
1.2%
0.6%
13
10 countries with National Social Insurance
Coverage is limited:
–Less than 10% of LF in
Madagascar, Tanzania &
Zambia
–± 55% Mauritius
... because economic activity
is largely based on the
informal sector and
subsistence agriculture
Issues:
•contribution rates low ± 10% of
salary
•administrative costs relatively
high; often ± 20% of annual
contributions
Angola
DRC
Madagascar
Mauritius
Mozambique
Seychelles
Swaziland
Tanzania
Zambia
Zimbabwe
Low replacement rates of 30–
50%:
•Unlikely to maintain retirees at
pre-retirement income
•Unlikely to keep retirees out of
poverty at retirement
Issues:
• asset management policies =
low returns on funds
• in many countries the benefits
are paid as lump-sum on
retirement not monthly income
•need to strengthen
governance, asset
management
14
Occupational schemes for civil servants
No information on Angola and
DRC so analysis of 12
schemes; could not access
detailed rules for several
countries
Normal retirement age: 50 60
Contribution rate usually
20% of pensionable salary
Of 12 schemes, 2 are DC, 2 are
unclear and 8 are DB;
4 of 8 DB schemes are funded or
partially funded
All countries
except
Seychelles
Coverage differs between
central, regional, local and
parastatals
Benefits normally generous
relative to private sector /
social insurance: e.g.
Mozambique; South Africa
7 schemes managed at arms length
from government by board of trustees
or similar; 4 managed inside
government dept; 1 not known
Issues:
•Generous benefits create fiscal pressure, especially in defined benefit and
unfunded environment
•Absence of adequate regulation (in many cases not covered by pensions
legislation/regulator) = need to strengthen oversight
•Benefit levels relative to private sector - mobility issues
•Often not dedicated/specialised management – instead, part of Finance or
Public Service Ministries
15
Occupational schemes - civil servants
Scheme
Angola
Botswana
DRC
Lesotho
Madagascar
Malawi
Mauritius
Mozambique
Namibia
Seychelles
South Africa
Swaziland
Tanzania
Zambia
Zimbabwe
Botswana Public Officers PF
Public Officers DC PF
Caisse Retraites Civiles et Militaires
Govt Public Pensions Schemes
Governance
Legislation
No information available
Board of Trustees
Provident and Pension Fund Act 1987
No information available
Pension Fund Secretariat Public Officers DC Pension Fund Act 2008
Ministry/Department
Act 62-144 of 1962
Board
not clear
Civil Service Pension Scheme
not clear
Government Institution PF
Ministry/Department
not available
Ministry/Department
Law on Functionaries/Agents of State, 2009
Board of Trustees
Pension Funds Act 1956
None - National social insurance for all Seychellois
Government Employees PF
Board of Trustees
Government Employees Pension Law of 1996
Public Service PF
Board
Public Service Pension Order 1993
Public Service PF
not available
Public Service Retirement Benefits Act no 2 1999
Public Service PF
PSPF Board of Directors Public Service Pension Act 1996
Pension scheme for civil servants
Ministry/Department
State Service Pensions Act 7 of 1989
PF = Pension Fund
16
Occupational schemes - civil servants
Coverage
Employer
Contribution
Member
Contribution
Type
Funding
Normal
retirement age
Botswana
Lesotho
Madagascar
Malawi
Mauritius
All civil servants & the military
All public officers
Civil servants & the military
Long term govt employees
Central govt; separate for local &
statutory bodies
15%
11.20%
16%
not clear
20% of wage cost
(2004)
5.00%
5%
4%
0
0
DC
DC
not clear
DB
DB
funded
unfunded
unfunded
Mozambique
Central, regional and local govt;
some parastatls excluded
Balance required
7%
DB
unfunded
60 (men)/55
(women)
Namibia
16%
7%
DB
funded
60
13%
7.50%
DB
funded
60
15%
5%
DB
75% funded
60
15%
10%
not clear
funded
Zambia
All government and statutory
institutions
All government employees excl.
parastatal
All government employees (from
data we have)
Central govt; separate for local &
statutory bodies
Central government employees
7.25%
14.50%
DB
unfunded
Zimbabwe
not clear
not available
not available
DB
unfunded
South Africa
Swaziland
Tanzania
60
55 or 45
55 or 60
60
60
60
17
Occupational schemes for private sector workers & voluntary
schemes
Even where most developed
(Botswana, Mauritius, South
Africa), information and
regulation have weaknesses;
subsequently difficult to give
comprehensive summaries
Retirement funds a strong
role in economies of higherincome countries – large
asset holdings
Contribution rate usually
around 20% of pensionable
salary, employers 10-20%;
employees 0-10%
Excludes many formal
employees as coverage usually
restricted to middle
management and above
Schemes
operate in
most
countries
Size and diversity of
financial sector affects
potential returns
The relative scale and
coverage of schemes
varies significantly
Issues:
• Administrative and asset management costs
• DC schemes put risks on members
• Protection of rights
18
• Country classifications and issues
19
ILO classification of SADC social security systems
Country
Number of social security branches
covered by a statutory programme/strict
definition
Angola
…
Lesotho
…
Botswana
Very limited statutory provision/1 to 4
Congo, DRC Very limited statutory provision/1 to 5
Malawi
Very limited statutory provision/1 to 4
Swaziland
Very limited statutory provision/1 to 4
Zambia
Very limited statutory provision/1 to 4
Zimbabwe
Very limited statutory provision/1 to 4
Mozambique Limited statutory provision/5 to 6
Mauritius
Limited statutory provision/5 to 6
Tanzania, UR. Limited statutory provision/5 to 6
Madagascar
Limited statutory provision/5 to 6
South Africa Semi-comprehensive/7
Namibia
Semi-comprehensive/7
Seychelles
Semi-comprehensive/7
Sickness
Maternity
Old age
Invalidity
Survivors
…
…
^
^
None
None
~
None
x
^
~
^
x
x
x
…
…
^
x
None
None
None
^
x
^
x
x
x
x
x
…
…
x
x
None
x
x
x
x
x
x
x
x
x
x
…
…
None
x
None
x
x
x
x
x
x
x
x
x
x
…
…
x
x
None
x
x
x
x
x
x
x
None
x
x
No information in source
…
Not available
Very limited provision
^
Limited provision
Limited provision
~
Only benefit in kind
Semi-comprehensive
x
One programme at least
Family
Employment Unemployallowances
injury
ment
…
…
x
x
None
None
None
None
None
x
None
x
x
x
None
…
…
x
x
x
x
x
x
None
x
x
x
x
x
x
None
None
^
None
None
None
None
None
None
x
^
None
x
None
x
Source: ILO 2010, World Social Security Report
20
Summarising the Formal Retirement System
Country
Mauritius
Swaziland
Angola
Congo (DRC)
Madagascar
Mozambique
Tanzania (URT)
Zambia
Zimbabwe
Botswana
Lesotho
Namibia
South Africa
Malawi
Seychelles
Universal/ meanstested social
assistance for the
elderly
√
√
National Social
Insurance
√
√
√
√
√
√
√
√
√
√
√
√
√
√
Occupational
provision for civil
servants
Occupational
provision for private
sector/voluntary
√
√
√
?
√
√
√
√
√
√
√
√
√
√
√
√
√
√?
√
√?
√
√
√
√
√
√
√
√
?
Comprehensive - 4 subsystems - (2 countries)
Mandatory - 3 subsystems (7 countries)
Voluntarist plus social assistance - 3 subsystems (4 countries)
Outliers (2 countries)
21
Informal Systems
• No evidence that other long-term savings mechanisms play a
role in retirement
• Pointers to housing as an important asset accumulation strategy deserves further investigation
• Other support mechanisms
– Absence of formal systems lead to reliance on continued work
(whether paid or on behalf of the household) and reliance on
kinship (family) and other social networks
– Despite lack of quantitative evidence, there is a consensus that
these are critical to survival but not adequate (poorest often
excluded) and under pressure (Aids, urbanisation, poverty, job
scarcity)
– Migrant worker remittances often feed into these kinship networks
– Formal systems in some cases shown to strengthen informal
systems – for example, allow for reciprocity from elderly
22
• Challenges and Responses
23
1: Design and Broad System Reform
• Found many exciting practices and leads – range of good practice and
experiments in the region
• Mozambique and Angola:
– comprehensive approach to social security for the elderly
– broad founding social protection legislation encompassing basic,
compulsory and complementary systems
• Mozambique
– Evidence is being collected to promote expansion of social assistance
• South Africa, Mauritius:
– Driving reforms to deal with coverage and high costs
• SA – social insurance (planning)
• Mauritius – in depth analysis of system including reforms in
economic restructuring (international support)
• Namibia social insurance legislated but not implemented
• Zimbabwe:
– Resilience of sound legal & institutional framework not immune to
economic and financial sector mismanagement
• NSSA continues to operate impressively but benefit promises broken
and private sector pensions and Insurance and Pensions Commission
24
reduced to shadow of what it was
2: Extending social pensions & improving administration
• Lesotho, Botswana:
– Introducing basic social pensions to reduce poverty at affordable
levels
• Lesotho (universal pension from age 70),
• Botswana (from age 65, benefit level modest compared to poverty line)
• Swaziland, South Africa:
– Testing and building new systems for delivery of cash
• Exploring private sector and modern communications technology
• Also range of experiments with smaller scale cash transfers across the
sub-continent
• SA development of new focused institutions (SASSA)
• Growing body of evidence on impact of social pensions
– Positive for children (growth, schooling) and generating income
(migration, labour supply, small enterprises)
25
3: Occupational schemes
• Botswana, South Africa, Mozambique:
– Addressing weaknesses in occupational & voluntary schemes and
strengthening social insurance schemes
– Averting fiscal and economic risks of badly managed civil service
occupational schemes
- Botswana conversion to defined contribution fund
- Mozambique working towards defined contribution fund
- South Africa funding of Government Employee Pension Fund.
• Mauritius, Botswana
– Improving regulatory environment for occupational & voluntary schemes
• Mauritius - revised Financial Services Act 2007 and re-establishment of Financial
Services Commission; improved monitoring of funds
• Botswana (review of pensions legislation proceeded in 2009 towards risk-based system)
• Zimbabwe, Mozambique
– Rebuilding credibility and effectiveness of social insurance schemes
• Zimbabwe building up after currency conversion
• Mozambique putting in place systems and transparency
26
4: General
• “Retirement” as a specific event less common in SADC: sustainable
household survival strategies will require people to continue
productive activities beyond any specific formal retirement age
• The five potential components of a retirement system sometimes not
seen and planned as complementary strategies but, at least in part, are
seen as alternatives (social assistance v. social insurance; social
insurance v. occupational).
• Reach of formal retirement systems limited by large informal and
agricultural employment & low average incomes
– Means limited personal savings, constrained administrative & revenue
collection systems/small financial sector for fund management
• In some countries social assistance used as mechanism to provide
poverty relief (a basic income) to the elderly
– Is expansion of social assistance appropriate to all countries?
– Is social assistance enough? Do we need to move beyond poverty relief to
income replacements and contributory systems incorporating the
informal?
27
• Conclusions
28
Conclusions
• In spite of challenges, some progress and best practice evident
• Potential to learn from each other and disseminate best practice
• “Informal protection” still playing a very large role – but little
systematic knowledge and consideration in policy making
• While information is improving there is limited standardisation of
data in order to do in depth comparative work and to start
assessing relative cost and efficiency
29
Thank you
30