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Pensions at a glance: Asia/Pacific

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Abstract

Many of Asia‟s retirement-income systems are ill prepared for the rapid population ageing that will occur over the next two decades. The demographic transition – to fewer babies and longer lives – took a century in Europe and North America. In Asia, this transition will often occur in a single generation. Asia‟s pension systems need modernising urgently to ensure that they are financially sustainable and provide adequate retirement incomes. In some countries – China, Vietnam, Pakistan, Chinese Taipei – pension levels are high relative to earnings. Early retirement ages, especially for women, provide additional financial pressure. These systems are unlikely to be sustainable as populations age and retirement-income provision matures. Yet many Asia/Pacific countries also face a problem of adequacy of retirement incomes. There are four reasons why current pension systems are unlikely to deliver a secure income in old age. First. coverage of formal pension systems is relatively low. Secondly, withdrawal of savings before retirement is very common. Thirdly, pension savings are often taken as lump sums with the risk that people outlive their resources. Finally, pensions in payment are not automatically adjusted to reflect changes in the cost of living. Ageing Asia must face these pension problems to deliver secure, sustainable and adequate retirement incomes for today‟s workers. Asia‟s ageing will be at its most rapid between 2010 and 2030. Given the long lag in pension-policy planning, there is now a narrow window for many Asian countries to avoid future pension problems and repeating many of the mistakes made in Europe and North America. But it will soon be too late.

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