Pension Challenges and

Reforms in Asia
Juzhong Zhuang
Deputy Chief Economist, Asian Development Bank
jzhuang@adb.org
and

Ganeshan Wignaraja
Advisor, Asian Development Bank
gwignaraja@adb.org

Asia-Pacific Social Protection Week

3 August 2016
ADB Headquarters, Manila, Philippines

The views expressed in this document are those of the author and do not necessarily reflect the views
and policies of the Asian Development Bank or its Board of Governors or the governments they
represent.

Key Messages
Challenging economic times in developing Asia
Softening growth and subdued inflation
Low investment returns
Population aging and old age poverty

The regions diverse pension systems have gaps:

Low retirement age

Inadequate present and future coverage
Variable replacement rates
Insufficient public pension spending

Reforms to pension systems needed for

mitigating old age poverty and financial
sustainability

Asia - moderating growth and low inflation

f: forecast
Source: Asian Development Bank, Asian Development Outlook Supplement, July 2016.

Low investment returns

175

S&P Global Equity Index (annual % change)

125

Index Value

75

25

-25

-75

750
700
650
600
550
500
450
400
350
300
250
200
150
100
50
0

HSBC Asian LCY Bond Returns Index

PRC

Hong Kong, China

Korea, Rep. of

PRC

Hong Kong, China

Indonesia

India

Indonesia

Philippines

Korea, Rep. of

Philippines

Singapore

Singapore

Thailand

Source: World Bank, World Development Indicators.

Accessed June 2016.

Thailand

Source: Asian Development Bank, Asia Bond Monitor,

March 2016.

Rapidly aging population

40.0
35.0

% of population aged 60 and above

2015

2030

30.0
25.0
20.0
15.0
10.0
5.0
-

*All OECD member-countries.

Source: United Nations, Department of Economic and Social Affairs, Population Division,
World Population Prospects (2015 Revision). Accessed April 2016.

Diverse pension schemes

Type of public pension scheme
DB
Kazakhstan
Uzbekistan
PRC
Korea, Rep. of
India
Pakistan
Sri Lanka
Indonesia
Philippines
Singapore
Thailand
Fiji
Papua New Guinea
OECD*

DC

Normal retirement age (current law)

Male
63
60
60
65
55
60
55
55
65
65
55
55
55
64

Female
58
55
1
55
65
55
2
60
50
55
65
65
55
55
55
64

DC - Defined Contribution
DB - Defined Benefit
*All OECD member-countries.
1 Blue collar women
2 Public sector only
Sources: OECD Pensions at a Glance Asia/Pacific 2013; World Bank, Pensions Database GP Social Protection; and ILO Social Security
Department, Scheme Information. Accessed April 2016.

Inadequate pensions coverage*

Present Coverage

Future Coverage

100
90
80
70
60
50
40
30
20
10
0

*Most recent estimates.

**OECD countries.
Note: Present coverage refers to pensioners as percent of population above legal retirement age.
Future coverage refers to contributors as percent of working age population.
Source: ILO Social Protection Statistics and Indicators Database and World Bank, Pensions Database GP Social
Protection. Accessed April 2016.

Insufficient public pension spending

9.0

Public pension spending (% of GDP)*

8.1

8.0

7.0

6.5

6.0
5.0
4.0
3.0
2.0
1.0
0.0

3.4
2.7
2.2

2.2

2.0
1.0

1.0

1.0

0.8

0.5

0.2

0.0

Most recent estimates.

**High income OECD countries.
Note: Public pension spending refers to both contributory and non-contributory pensions.
Sources: OECD Pensions at a Glance Asia/Pacific 2013; World Bank ,Pensions Database GP Social Protection
(Accessed April 2016) and OECD Pensions at a Glance Asia/Pacific 2013.

Possible Pension Reforms

Reform Area

Reform Options

1. Retirement Age

Raise statutory retirement age

Tighten early retirement provisions
Increase incentive to work and lifetime learning

2. Benefits

Limit withdrawal of savings before retirement

Calculation based on lifetime average salaries
Less favorable indexation

3. Private Sector Pensions

Increase incentives for voluntary private sector pensions

Encourage entry of reputed foreign pension providers
Partial or full privatization

4. Financial Education

Raise awareness about retirement planning

Provide financial literacy and retirement planning education

5. Social Pensions

Target elderly poor

Set at a fiscally affordable level
Simplified administration

6. Tax

Tax reforms to broaden tax base

Improve tax administration

Key Messages
Challenging economic times in developing Asia
Softening growth and subdued inflation
Low investment returns
Population aging and old age poverty

The regions diverse pension systems have gaps:

Low retirement age

Inadequate present and future coverage
Variable replacement rates
Insufficient public pension spending

Reforms to pension systems needed for

mitigating old age poverty and financial
sustainability