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Non-Contributory Pensions and Poverty Prevention: A Comparative Study of Brazil and South Africa

Author: HelpAge International
Date: 2003
Size: 28 pages (375 KB)

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Summary

What is the role of non-contributory pension programmes in reducing and preventing poverty and vulnerability among older people and their households in developing countries? This report from the Institute of Development Policy and Management and HelpAge International analyses non-contributory pension programmes in Brazil and South Africa, looking for evidence of their impact on well-being, participation and security. It concludes that extending such programmes to other developing countries could have a significant impact on reducing poverty and vulnerability among households with older people.

The debate on how best to organise old age support in developing countries is growing. Old age poverty is widespread in developing countries, and informal old age support is coming under increasing pressure from adverse economic conditions, migration, HIV/AIDS and changes in household composition. In the absence of policy interventions, older people and their households will continue to expand the ranks of the poor.

Pensions play a key role in old age support systems, but research and debate on pension policy has so far focused on contributory pension programmes. Non-contributory pension programmes, present in only a handful of developing countries, are more likely to have an impact upon poverty and vulnerability and facilitate economic development. Brazil and South Africa are the developing countries with the largest programmes.

• Non-contributory pension programmes have a significant impact on poverty. In their absence, the poverty headcount and the poverty gap would be appreciably higher for households with older people. The programmes significantly reduce the probability that individuals in houses with a pension recipient will be in poverty.
• In Brazil and South Africa, pension benefits are shared within households, and non-contributory pension benefits should be considered more appropriately as household cash transfers tagged on old people.
• Non-contributory pension programmes reduce household vulnerability. Households with a non-contributory pension recipient show greater financial stability and lower probability of experiencing a decline in living standards.
• Non-contributory pensions promote functionings (the beings and doings that people value) in older people. Preliminary analysis shows that pension recipients have a lower incidence of deprivations, especially in urban areas.
• In Brazil and South Africa, non-contributory pension programmes reach a large number of poor older people at relatively low cost. The programmes are financially sustainable and attract a large measure of political support.

Extending non-contributory pension programmes to other countries could have a significant impact on reducing poverty and vulnerability among households with older people.

• In low-income countries, with a limited tax base and a lack of an effective administrative structure, the introduction of such programmes will require international support.
• Recent initiatives, such as the International Labour Organisation’s Global Social Trust, are beginning to focus attention on the nature of the international support needed.
• Further work needs to be done to consider more specific issues of programme design, administration and financing in these countries.
• It is unlikely that the Millennium Development Goals can be successfully achieved without urgent consideration being given to the establishment and extension of non-contributory pension programmes.

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Source: HelpAge International and IDPM, 2003, ‘Non-Contributory Pensions and Poverty Prevention: A Comparative Study of Brazil and South Africa’, HelpAge International and Institute of Development Policy Management (IDPM), London and Manchester
Author: HelpAge International, http://www.helpage.org