Coverage : The Scope of Protection in Retirement Income Systems
The coverage of old-age protection systems is a central concern in developing countries. While most countries mandate that workers make contributions to a retirement-savings plan, fewer than ten per cent comply in South Asia and Sub-Saharan Africa,...
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| Format: | Brief |
| Language: | English |
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Washington, DC
2012
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| Online Access: | http://documents.worldbank.org/curated/en/2005/07/6258736/coverage-scope-protection-retirement-income-systems http://hdl.handle.net/10986/11214 |
| Summary: | The coverage of old-age protection
systems is a central concern in developing countries. While
most countries mandate that workers make contributions to a
retirement-savings plan, fewer than ten per cent comply in
South Asia and Sub-Saharan Africa, as compared to
higher-income OECD countries which cover 80 per cent or more
of their workforce. Economic development is the major
determinant of coverage protection for retirement systems,
with the level of income per capita as an excellent
predictor of coverage rates. The note concludes that : a)
coverage rates track income levels closely and evasion is
driven by the high cost of joining the formal sector; b)
pension scheme design can exacerbate the evasion problem; c)
a poorly designed and managed scheme should be reformed
prior to attempts to expand its coverage; d) extending
financial solvency of a pay-as-you-go scheme is not a good
rationale for expanding coverage; e) a safety net can help
cover the inevitable gaps in a contributory scheme; f)
defined contribution schemes tend to provide better
incentives for coverage; g) creative approaches to expanding
coverage include direct matching contributions for low
income workers and finding ways to reduce transaction costs
by harnessing existing groups. |
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