The 19th ISSA International Conference of Social Security Actuaries, Statisticians and Investment Specialists will run from 6 to 8 November 2018. The Conference, in Kuwait, will address many issues related to the sustainability and adequacy of social security programmes and pensions in particular.
The ISSA Country Profiles show that pension programmes are the most common form of social security protection worldwide. Over recent decades the expansion of pension programmes has been underpinned to an important extent by a heightened focus, both at the national and multilateral level, on achieving the eradication of poverty.
The objectives of the 2030 Sustainable Development Goals have been framed to meet this aim. As part of this, great store is given to the role of basic pensions, as key components of social protection floors.
Typically, basic pensions – sometimes called social pensions – are tax-financed. Being more readily capable of extending coverage, especially to those without access to contributory social security pensions, they facilitate social and economic inclusion and income security.
Given the focus on efforts to develop basic pensions internationally, it might be thought that most countries’ pension systems are characterized by tax-financed basic pension provision and that the role of pensions is to tackle old-age poverty only.
Let’s look at this more closely.
In fact, many countries have contributory social security pension programmes, which are financed in the main by monthly contributions paid by employers and employees. Linking benefit amounts to contributions is meant to ensure that benefit levels are adequate for large groups of the population, in a manner that tax-financed basic pensions, by definition, never aim to be.
The feasibility of tax-financed pensions is presented commonly as a question of fiscal space. In a similar manner, the abilities of countries and their economic actors to adequately finance contributory programmes should take into account the question of contributory space. We have witnessed an international trend in falling levels of corporation tax rates over the last two decades. This would suggest that, with political will, there is leeway to ensure that contributory financing is adequate.
In contrast to the primary poverty-alleviating role attributed to basic pensions, contributory social security pensions have multiple objectives. For the covered population, contributory social security pensions permit income smoothing across the life course and they offer insurance against longevity and disability (and premature death, for dependant survivors). As key elements of workers’ fundamental social and labour rights, they help foster national economic growth, decent work, safe workplaces and social cohesion. These pensions also work alongside national fiscal policies to support the objectives of income redistribution and, indeed, also help to reduce poverty.
Contributory pension programmes represent, both, an intra-generational and an intergenerational social contract, simultaneously collecting contributions and paying benefits promised to successive generations. The ability of a pension programme to continue to meet its pension promises depends on a number of factors, of which demographic and economic factors are paramount. As set out in the ILO–ISSA Guidelines on Actuarial Work for Social Security, it is in appropriately measuring and assessing these factors that the professional role of social security actuaries is essential.
In a dynamic context of demographic and economic change, recurrent challenges associated with contributory social security pension programmes relate to their adequacy and sustainability. For actuaries, specialists and laymen alike, when discussing these important questions it is important to always frame the debate in terms of the multiple objectives of national contributory social security pension programmes.
It is also necessary to take in account the different assumptions and intervening contextual factors that dictate how all national pension programmes are designed and financed. Owing to their varied institutional histories and different social, economic and demographic contexts, no two national pension programmes are identical. The present-day factors that determine the adequacy and sustainability of pension programmes also vary.
As part of its programme of topics for discussion, it is to all these vitally important issues that the 19th ISSA International Conference of Social Security Actuaries, Statisticians and Investment Specialists will turn – the Conference in Kuwait City, is being held at the invitation of the Public Institution for Social Security of Kuwait. To accompany this agenda point, and to provide an important reference source on this topic, a special issue of the International Social Security Review (Vol. 71, No. 3), entitled Actuarial and financial reporting of social security obligations, has been released.