INCOME SECURITY FOR THE ELDERLY IN DEVELOPING COUNTRIES

While European pension debates focus on long-term sustainability of existing pension systems, globally the major challenge is the lack coverage. Only 30% of the world’s working age population contributes to any pension scheme and only slightly more than half of the worlds elderly receive any type of pensions or other income support benefits. Main reasons of this situation are at the labour markets where only relatively small por­tions of the population are in formal employment which would allow achieving effective coverage by contributory pension schemes. Paper shows that countries which achieved significant expansion of coverage did it through non-contributory, so-called social pensions – universal, means-tested or pensiontested. The main challenge of non-contributory pensions benefits is not their sustaiability in terms of benefit costs as there is a number of policy parameters allowing to control benefit expenditure, but sustainability in terms of securing adequate budgetary funding. It requires implementing legal and budgeting mechanisms which would prevent discretion and politi­l volatility in allocating resources necessary to fund such pension schemes.