Social services


The World Bank and ageing

19 June 2006 | Inside the institutions

versión español

The social protection group within the human development vice-presidency (both in Washington and in the regions) works on issues of income protection and poverty alleviation for the aged. The number of individuals working part- or full-time on ageing is approximately 60. The health group works on issues of provision of health services for the aged. The Poverty Reduction and Economic Management (PREM) vice-presidency works on reform issues for the aged to the degree that there are macroeconomic implications. Most of the intellectual leadership on this issue has come from the social protection group. However, leadership in specific projects varies, and may also include PREM and the financial sector group.

A key Bank intervention was the 1994 paper Averting the old age crisis. Averting rejected the traditional ‘pay as you go’ social security system (where current contributors pay for current recipients) widely used in most OECD countries. It advocated a ‘multi-pillar system’. The approach was criticised by NGOs such as Global Action on Aging, for increasing inequity, abandoning the concept of social insurance, reducing coverage, and being less efficient. More recently, a key reference guiding the Bank’s work is Old age income support in the 21st century, by Holzmann and Hinz (2005).

The only official board-approved strategy for pension reform is presented in Social Protection Sector Strategy: From safety net to springboard (2001). The strategy recommends the establishment of ‘multi-pillar’ pension systems: a ‘zero pillar’ that provides a minimum level of protection; a ‘first pillar’ that consists of a publicly managed, unfunded plan; a ‘second pillar’ that is a mandatory privately funded plan; a ‘third pillar’ that is a voluntary, privately funded plan; and finally, complementary provisions for uncovered workers and the poor.

A recent Independent Evaluation Group (IEG) evaluation of the Bank’s work on pension reform found that between 1984 and 2004, the Bank gave over 200 loans and credits to 68 countries for reform of pensions, and issued more than 350 papers. The Bank provided $5.4 billion in pension-specific lending during this period. Financing has included support for policy adjustment, sector investment, technical assistance and capacity building. Financing can be dedicated; part of growth, competitiveness and investment reform loans; part of sectoral reform loans; or part of a Poverty Reduction Support Credit, the Bank financing instrument to support national development plans.

Generally, the Bank works on national reform initiatives including mandatory public pension schemes, civil service pension schemes, and the framework for voluntary contractual savings. In recent years, it has also supported reform initatives at a sub-national level. Both financing and research are concentrated in the Europe and Central Asia, and Latin America and the Caribbean regions. This is now gradually extending to Sub-Saharan Africa and South Asia.

World Bank support for pension reform (1984 – 2005)

Region No. of countries No. of projects Amount $bn
Africa 14 26 0.1
East Asia and Pacific 4 7 0.5
Eastern Europe and Central Asia 25 93 1.5
Latin America and Caribbean 15 57 3.1
Middle East and North Africa 6 9 0.1
South Asia 4 12 0.1
Total 68 204 5.4

The Bank also has an active programme of knowledge management including many country, regional and international level training programmes, conferences and seminars developed by the World Bank Institute as well as initiatives by the social protection, financial sector and PREM groups. The Bank organises periodic two week courses on pension reform which covers a range of approaches to pension reform issues.