In this post Professor Jane Falkingham and Dr Athina Vlachantoni talk about their chapter on Social Protection for older people in Central Asia, published in ‘Social Protection for Older Persons: Social Pensions in Asia.‘ You can read more about their work in their recent blog on gender and pensions.
In our chapter on social protection for older people in Central Asia we detail the impact of economic and political transition on pension systems during the 1990s, through to the mid-2000s in Central Asia and the South Caucasus. We focus on the first wave of pension reforms and the current pension systems in the region today in four case study countries: Armenia, Kazakhstan, the Kyrgyz Republic, and Tajikistan. In particular, our analysis focuses on the structure of the benefit system and the role played by minimum social pensions alongside the formal contributory system and informal transfers, including remittances.
At independence, all the countries of the former Soviet Union (FSU) inherited extensive social welfare, including a comprehensive pay-as-you-go (PAYG) pension system with low retirement ages (60 for men and 55 for women) and generous opportunities for early retirement for selected worker groups such as farmers. However, most of these countries underwent significant economic dislocation affecting the welfare system between 1990 and 1995, with GDP per capita falling by more than half in all the countries of Central Asia and the South Caucasus, except for Uzbekistan. Radical pension reform was on most countries’ agenda by the mid-1990s, but the four countries went about it in different ways.
Kazakhstan reformed its system in the mid-1990s, abandoning the old PAYG Soviet system with defined benefits and switching to a fully funded defined-contribution system, while from January 2014 women’s retirement age is set to rise from 58 to 63 over ten years. The Kyrgyz Republic was an early reformer and less radical than Kazakhstan, adopting notional accounts in 1997, albeit in the context of a minimum contributory pension still linked to employment. The first wave of reforms in Armenia took place later, but the country passed new pension legislation in December 2010 and moved to a fully funded model from 2012. In Tajikistan, pension reform is only now being discussed, with technical support funded by the EU to December 2014.
One of the most pressing future concerns remains the issue of adequacy for current and future pensioners. In contrast to many developing countries with a similar per capita GDP, most countries in this region have a zero pillar social pension, aimed at poverty alleviation, and the first pillar incorporates a minimum pension. The critical question is the level at which these are set. Our analysis shows that for those who qualify for a contributory pension, the average level of benefits is just above the subsistence minimum. For those on a social pension, however, benefits are insufficient to lift them above this level.
References
Falkingham, J. (2005). ‘The End of the Rollercoaster? Growth, Inequality and poverty in Central Asia and the Caucasus‘, Social Policy & Administration, 39(4): 340-360.
Falkingham, J. and Vlachantoni, A. (2012) Social protection for older people in Central Asia and the South Caucasus. In, Social Protection for Older Persons: Social Pensions in Asia. Mandaluyong, PH, Asian Development Bank, 246-278.
Professor Jane Falkingham and Dr Athina Vlachantoni are researchers at the Centre for Research on Ageing and ESRC Centre for Population Change at the University of Southampton.