Pension Programs

AN ADEQUATE PENSION SYSTEM for the elderly is the key to providing income security and reducing poverty. In fact, for countries with well-developed pension systems, pensions have been instrumental in reducing the poverty rates of the elderly to lower levels than for any other age group in the population. For example the poverty rate for the elderly in the United States fell from 35.2 percent in 1959 to 10.2 percent in 2003. The overall poverty rate for the United States in 2003 was 12.5 percent.

Nonetheless, pensions are virtually nonexistent in many countries. Without adequate pensions, the elderly are forced to rely on their families, maintain their employment, or live in poverty. Expanding pension coverage, either through the government or the private sector, is an important part of improving social welfare for aging populations.

Indeed pensions will become increasingly important in the future for several reasons. First, a worldwide trend of decreasing mortality rates is causing more people to live into old age. Elderly women face particular risks because they often outlive their husbands and must rely on any survivor benefits they can receive through their husband's work record. Reduced fertility rates are also creating strains for pension systems, because there will be fewer young people to support the increasing numbers of old people.

Most countries will experience rising old-age dependency ratios, and while industrial countries have highly developed pension systems, these systems will be increasingly pressured because the number of elderly will increase rapidly in the coming years in relation to the working-age population. Additionally migration and industrialization are breaking the links among family members and making it more difficult for children to support their elderly parents. Without the income security provided by pensions or other means, these new elderly will find it difficult to avoid poverty.