Additional Background Resources

Some countries have laws which make it mandatory to take care of elderly parents. In India there is a law (Section 125 of the Code of Criminal Procedure) which makes it a criminal offense to neglect your parents. However, this remains a paper law as it has never been applied in a court. Because of the competition for jobs and in order to make promotion opportunities available for younger people, the retirement age is kept artificially as low as 58 years. This forces people to retire at the peak of their career. Many of them are unable to find reemployment and a vast resource is being wasted. *To support increasing numbers of older dependents and to improve the quality of care provided, countries with well-developed social security systems have witnessed rapid growth in real per capita benefit expenditures during the past several decades. While coverage remains much lower in developing countries, both in terms of persons protected and levels of benefits provided, substantial increases in the relative importance of social security in the national economies of these countries have also been registered. The same trend has been observed with respect to income security for the elderly. *During the 1970s the speed of increase of expenditures for pensions has in fact been higher in many countries where schemes have not yet reached maturity, than in industrialized countries. For instance, according to ILO statistics, such expenditures increased more than twenty-fold in Brazil and Costa Rica, seventeen fold in Barbados and Bolivia and about fivefold in Iraq, Mauritius, the Philippines and Tongo during the period 1970-1977. In contrast, during the same period the pension expenditure only doubled in the Federal Republic of Germany and Poland, and increased by a factor of 2.8 in the United States of America. *In the case of developing countries in which income security schemes have not yet reached a matured stage, these rapid increase in expenditure appear mainly as a result of continuously increasing numbers of new beneficiaries. While absolute expenditures for pensions are increasing most rapidly in many developing countries, the fraction of national income allotted to pension payments remains highest in industrialized countries, the fraction of national income allotted to pension payments remains highest in industrialized countries. Pension expenditures expressed as a percentage of gross domestic product (GDP) have reached nearly 10 percent in overall industrialized countries, such as the Federal Republic of Germany and New Zealand; in contrast, in many developing countries those expenditures remain less than 1 per cent of GDP. This may be attributed to the fact that the demographic shift towards the aging of populations is less advanced in developing countries, as well as to the traditional responsibility of the family in supporting older persons. As populations age, however, the addition of more older dependents to a family in a poor country may significantly alter the level of subsistence of other members of the family. As a result, the aging of the population may lead the Governments of many developing countries to assume a greater share in support for the elderly. Time may well be short, as these countries will be faced with adjusting their social and economic policies to rapid changes in demographic structure. Even if the governments desire to pay a small sum as a pension to each person, the numbers of older people is so large that the total budget becomes huge. For example, if the Government of India decided to pay INR 100 each month to each older person, by the year 2000 the monthly budget would be INR 7,600 million. Such a sum is unimaginable for any country. Moreover, the INR 100 pension is not even enough for 1 meal a day. In developing countries there is no organized collection of pension from younger people which can help pay for the elderly of today. Such schemes are termed "pay-as-you- go" schemes. These are bankrupt in all developed countries where they have been implemented. Developing countries will do much better to think of alternate forms of funding pension plans (e.g. fully-paid-up pension plans).