‘Universal social pension scheme for elderly is feasible’

The Minister of Gender, Children, Disability and Social Welfare and the Malawi Network of Older Persons’ Organisations (Mnepo) recently launched a study titled Realising Income Security in Old Age: A study into the Feasibility of a Universal Old Age Pension in Malawi. Among others, the study found that a universal social pension scheme for older persons is both needed and feasible in Malawi. Our reporter BRENDA TWEA wanted to hear more about the study from Manepo executive director, Andrew Kavala:

Kavala: The current pension system is contributory and limited

What is the significance of this study?

Population aging is one of the most important global demographic mega trends that can no longer be ignored. It is happening in all regions of the world and progressing fastest in developing countries, including the ones that have a large population of young people like Malawi. The growing aging population has significant consequences for providing social protection to the elderly. The study was conducted to explore the feasibility of such a pension scheme to inform some policy direction with government, donors, development partners and other key stakeholders.

What are the major gaps with the existing social protection programmes if there are any?

Social protection floors are increasingly recognised as a necessary and effective approach to ensure the benefits of development are shared fairly, and no one is left behind. This issue is no more relevant than for older people who—despite the contribution they have made throughout their lives—often struggle to secure an income. The expansion of social programme such as Social Cash Transfer [SCT] has provided a lifeline for many older people. Nearly a quarter of older people [65 plus] live in a household receiving the transfer, while 16 percent are direct recipients [as household heads].

A number of studies have shown the positive impacts of the scheme on increasing incomes and food security.  However, a lot of the older people – including many of the very poorest—are not covered by the SCT. Three quarters of older people are not in receipt of the SCT. The challenges of poverty targeting, as well as the focus on household-level labour capacity, means that the scheme fails to reach some of the very poorest. Rather than empowering older recipients, in many cases the targeting process has been found to create conflict and jealousy in communities. Older people only marginally benefit from other social assistance programmes such as food and cash for work. Analysis of the third Integrated Household Survey [IHS] shows that only 16 percent of older people live in households receiving social assistance, and only three percent of older people are direct recipients of this support.

Don’t we have an existing pension scheme which government is implementing?

The current pension system is contributory and also has a limited scope to provide security for most Malawians. Currently, fewer than five percent of older people receive a pension, and most of these are relatively better off. This is mainly due to the fact that most Malawians enter old age after a lifetime of poverty, working in informal agricultural work where they never had the opportunity to contribute to a pension.

 

What is the rationale for this universal social pension scheme?

Universal social pensions have proven to be a popular and successful approach to ensure income security, dignity, and wellbeing for older people and their families. Such schemes have been of particular importance in low income agricultural economies where the role of contributory pensions is more limited. Universal pensions have particular advantages in their administrative simplicity and political acceptability.

The fact that all older people are eligible means they effectively reach the very poorest and most vulnerable. This marks them in contrast to poverty targeted social pension which consistently fails to reach significant portions of poor older people. They are also able to include vulnerable older people living close to the poverty line. Their simple eligibility criteria also mean that they are relatively straight forward to implement at national scale, even in low income settings with limited administrative capacities. For instance, Zanzibar’s universal pension reached 86 per cent coverage in the first month of implementation.  By providing an entitlement that all citizens will one day benefit from, universal pensions tend to be politically popular, which supports the willingness of the population to see them financed through general tax revenue.

Can a country like Malawi afford such a scheme?

The study found that affordable options exist for Malawi to introduce a universal pension. Given the challenging fiscal context in the country, a pragmatic approach would be to begin by introducing a more limited scheme of, K3 700 for older people over 70s for instance. This benefit level is in line with averages for other social pensions across the region. A scheme of this nature would cost K23 billion [0.4 percent of gross domestic product-GDP], and provide a benefit of 20 percent of average income. Despite the economic challenges facing Malawi in the short term, with political will, a pension of this nature could be financed through ongoing efforts to increase national revenue.  Starting small would also create space to put in place administrative systems before scaling up to higher levels of coverage and adequacy.

In the medium to long-term, the country could seek to lower the age of eligibility and increase the benefit level to the poverty line. In line with current life expectancy, an age of eligibility of 60 years would be an appropriate ambition, which would create a scheme costing 0.9 percent of GDP [K33 billion, in today’s prices], assuming a monthly benefit of K3 700. Such scheme can be introduced initially at a higher age threshold, of 65 or 70 years old and progressively be decreased as economic conditions allow.

Any last words?

A universal pension in Malawi would support older people to live their later years in dignity. Evidence from other countries in the region shows how, with some income in their pockets, older people are better able to take charge of their lives, and participate in family and community decisions. A universal pension piloted in the Katete District in Zambia was found to reduce accusations of witchcraft, with older people seen as an asset by the community, rather than a burden. A pension would also contribute to increasing gender equality, by addressing the acute vulnerabilities faced by older women.

 

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