Poverty and pensions: The rights of older people

Relatively rapid population ageing in poorer countries implies that unless
policies and social protection schemes specifically address issues of old
age poverty, targets for poverty reduction will not be achieved. Studies of
poverty in old age reveal its multi-dimensional nature, including its
persistence and its intergenerational impact.

Public policy on ageing in developing countries has tended to emphasise
the welfare requirements of older populations, ignoring the wider
dimensions of livelihoods in old age. The prevailing emphasis on pension
schemes for formal sector workers and on individual contributions to
pension funds, as outlined by the World Bank in 1994, excludes the
majority of older people in poor countries who live and work outside the
formal sector and lack the capacity to save. Basic non-contributory
pension schemes, designed as an integral part of government poverty
reduction programmes, are most likely to target the increasing numbers of
poor older people and have an intergenerational impact within their
households.

There is evidence that such non-contributory pension schemes, especially
universal schemes, can have a significant impact on poverty reduction at
family and community level. Economic evidence suggests that such
measures are affordable even for the poorest countries. Willmore (2001) for
example, in his study of existing schemes in Africa (Mauritius, Namibia
and Botswana), calculates the cost to be between 0.4 to 2 percent of
GDP. The overall cost to governments is to a large extent dependent upon
political rather than economic decisions, and is determined by decisions
about the benefits paid and criteria for eligibility.

A brief overview by HelpAge International of a number of participatory
research studies with poor older people provides some evidence of their
survival strategies and points to the potential of non-contributory pensions
to contribute significantly to poverty reduction. They also suggest that
non-contributory pensions encourage household economic activity by
strengthening the contributions of older people.

This research on older people’s livelihoods provides evidence of their
substantial social and economic contributions to the household and
community. Recent studies in communities in Tanzania and Mozambique
(HelpAge International, 2000) demonstrate the variety of income generating
and non-income generating activities carried out by older people. These
contribute to a fragile household support system which older people in turn
depend upon. The Tanzania study reports that income derived from these
activities was used by the family, primarily for paying school fees. The
findings suggest that minimal but guaranteed and regular income in old
age will have important intergenerational and anti-poverty effects. Future
research must serve the policy imperative to develop feasible and effective
social security measures for older people and to protect the rights of older
people to equal participation in the benefits of development.

Research in South Africa, in poor rural and urban communities with high
unemployment rates, found older people's pension income supporting
several household members. Spending priorities were school fees and
household food. However, pension income alone may not guarantee that
basic needs of older people are met. The same study found that older
people face severe problems accessing health care services, particularly
highlighting the poor treatment by health staff. This evidence strongly
suggests that universal non-contributory pensions or old age cash
payments provide a core component of old age support, but that this must
be complimented by policies ensuring equal access to employment,
family support and healthcare.

Emerging evidence from other sources – Willmore (2001) and Devereux
(2001), for example – suggests that for poorer countries, making universal
minimal cash payments to older people is an economic possibility,
especially as a component of national poverty reduction or social security
systems. Older people's capacity to contribute to household well-being
and to poverty reduction within communities is well documented. Policy
initiatives aimed at poverty reduction, targeted through older people in the
form of non-contributory pensions, cost poorer countries no more than
richer countries in terms of percentage of GDP. What determines the
proportion spent on pensions are political decisions regarding eligibility
and benefits.

HAI takes a rights-based approach to development, and its mission is to
work with and for disadvantaged older people worldwide to achieve a
lasting improvement in the quality of their lives. At the recent 2nd World
Assembly on Ageing, held in Madrid in April 2002, 159 participating
governments signed a Plan of Action on Ageing and issued a political
declaration. These commit governments to extending the ‘right to
development’ to older people, halving old age poverty by 2015, ending
age-based discrimination, and including older people in national and
international frameworks – such as the Millennium Development Goals and
the Poverty Reduction Strategy Processes – designed to combat poverty.
The implications for pensions policy in the South of implementing the
rights of older persons need urgent consideration.

Further research is needed on existing non-contributory pensions and
grants to older people, focusing both on their impact on wider poverty
reduction and the well-being of older people. This will also require
governments and civil society to adopt a broader approach to social
security for older people.

Mandy Heslop
HelpAge International
1st Floor, York House
207-221 Pentonville Road
London N1 9ZN, UK

T +44 (0)20 7278 7778
F +44 (0)20 7843 1840

mheslop@helpage.org

See also
‘Strengthening Village and Neighbourhood Organisations: Safety Networks
for the Vulnerable’, HelpAge International, Dar es Salaam, 2000
‘Universal Pensions in Low-income Countries’, paper prepared for the
annual meeting of the International Association of Pension Fund
Organisations, Costa Rica, by I. Willmore, November 2001
‘Capacity and Connection: A Study of Ageing in Mozambique’, HelpAge
International, Maputo, G. O'Donaghue, 2001

The deficit requires annual transfers from the urban workers scheme and the treasury of about 1% of the GDP. Yet this is justified by the enormously positive socio-economic impact of the programme

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