The world is ageing rapidly. Older people currently comprise 12.2% of the world’s population, with 67% living in developing countries.1 By 2050, the proportion globally will reach 21.2%, with 80% in developing countries. As the world ages, ensuringincome security in old age becomes an increasingly important policy issue.
However, only 48% of the world’s older people have access to a pension and, unless major reforms are undertaken across developing countries, this proportion is likely to fall. The absence of pensions causes significant challenges for older people and society. Despite growing frailty, many older people are obliged to continue working in old age, often in insecure and low paid employment. As they become less able to work, their families are expected to care for them. Yet, many families taking on this responsibility have to reduce their investments in their own children and income generating activities, while many carers of older people have to withdraw from the labour force.
This paper discusses the policy options available to developing countries committed to offering universal pension coverage and maximising the incomes of older people. It presents a basic model of a pension system comprising up to three tiers that can be adapted to the circumstances of all countries. The model is based on evidence from both developed and developing countries.