The ongoing statistical observations and sociological studies show a steady trend of increasing life expectancy in civilized countries.
There is a gradual process of “aging” – the proportion of the working-age population in comparison with the elderly is falling, creating a threat of a crisis in pension payments.
In this regard, most countries of the world are softly or harshly reforming the social security system, aimed at increasing the share of providing the funded part of the pension and raising the retirement age.
Types of pension systems
Only in economically developed countries have pension systems been created and are functioning. According to the types, directions and sources of formation, several main models of pension provision are distinguished:
Cumulative solidarity
It is successfully used in countries with a high level of private capital (USA, Germany). Only a fifth of the future pension is formed from savings in state pension funds.
Contributions to state funds amount to just over 10 percent. The rest of the share is formed by contributions to non-state funds of employers’ companies, the future pensioners themselves. The stable economy, high incomes of these countries allow older people to be confident in the safety of their savings until retirement age, travel the world, and not experience financial difficulties.
In fact, ordinary Americans regularly receive a pension from three sources – $ 1,100 each from the state and funds of employing companies and twice as much from personal savings;
Solidarity-cumulative
Used in the Russian Federation, CIS countries, Poland. It is also formed from three parts, but with a clear prevalence of the state’s share. Of the total amount of pension contributions (22% of the employee’s taxable income), the base 6% form an impersonal solidarity part and go to the budget, 10% are reflected in the citizen’s personal account as the state’s insurance share, 6% are the funded part, which the future pensioner at his discretion can be kept both in state and non-state pension funds.
The unstable financial situation in the CIS countries, insufficient protection of private savings do not give confidence in receiving sufficient funds for living at the onset of retirement age, so up to 40 percent of older people are forced to continue working after receiving a pension. The state pension is from 10 to 20 thousand rubles a month, funded – adds 1-2 thousand or is not paid;
Cumulative insurance
This type of savings is documented, for example, in Ukraine – the solidary state part in it is up to 30 percent, insurance – up to 10%, funded – 60%. In fact, mandatory contributions to the state pension fund amount to more than 30% and are the only source of funding. Due to the instability and distrust of citizens in state bodies, the funded part is not formed and is not paid.
Kazakhstan, Mexico, Chile use an exclusively funded pension system, depriving pensioners of state social guarantees.
The basic social old-age pension after 40 years of residence is (in terms of) 900 US dollars per month. For each year less than forty, its size decreases proportionally. The most needy citizens of retirement age are paid a targeted additional pension of $100 per month.
The accumulative pension part is formed at several levels:
- Asia-Pacific Compulsory State Program;
- Corporate pension plans (by types of companies and industries).
Total contributions to pension funds account for over a third of wages, but they provide the assurance and security of a full retirement benefit package.
Modern trends in the development of pension systems
In the USA, Canada, Australia, and developed European countries, in addition to mandatory state contributions, future pensioners accumulate additional pensions in their large companies and corporations.
Israel also has a successful two-tier pension system. In addition to the state pension, each citizen accumulates funds in the social insurance fund through personal contributions during the working period and deductions from the employer.
In France, the main share of the size of the pension falls on the pay-as-you-go system. The size of the pension largely depends on the length of service.
On raising the retirement age
A gradual “soft” increase in the retirement age due to the constant increase in life expectancy of citizens is planned in many countries:
- in France, up to 67 years (project – until 2023);
- in the UK, 66 years from 2019, 67 from 2026;
- in Germany – 67 years – until 2029;
- In the Netherlands, since the beginning of 2018, the retirement age has been increased to 68;
- The Swedish government is in favor of raising the retirement age to 75, the highest retirement age in the world.
Brazil most recently had the smallest retirement age in the world at 54, but since 2017 it has been raised to 65 for men and 62 for women.
Where are the lowest pensions
In underdeveloped countries, the state does not pay old-age pensions at all (India, Thailand, Iraq, Philippines, Vietnam, Pakistan).
Pensions there are paid only to civil servants with sufficient length of service. In the countries of the European Union, the lowest pensions are in Bulgaria, Romania, Estonia and Lithuania.
Conclusion
The gradual increase in the average life expectancy of citizens in civilized countries makes their governments reasonably build a long-term strategy for the development of the pension system. For its successful functioning, financial stability, GDP growth, a multi-level well-protected organization for the preservation and increase of pension savings are necessary.
Corruption, fraud, economic instability lead to a loss of confidence of citizens in the safety of their future pensions and lead to a crisis and the need to raise the retirement age in the world. To what extent will the pension reform increase unemployment and exacerbate the situation on the labor market?
Interesting facts about retirement
- Slovakia applies a “floating” retirement age of 62 years. At the same time, the amount of the pension depends on the length of service (the minimum is 15 years and the amount of insurance contributions).
- China is having a hard time providing for the lives of the elderly. Only former civil servants and workers of factories and factories receive a pension with at least 15 years of work experience and mandatory deductions of 11% of the salary. The rural population is deprived of such an opportunity.
- In Finland, the share of pensioners is almost a fifth. The pension is more than $1,700, but they are eager to work longer, since the state has provided for a quarterly increase in pensions since 2017.
