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Analyzing non-contributory social pension programs

Prasetyono, Pipin (2017): Analyzing non-contributory social pension programs.


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Due to higher life expectancy and declining fertility which cause an accelerated demographic transition, there was an increasing trend in population ages of 65 and above, as a percentage of total population in the last three decades, from 5.88 percent in 1985 to 8.27 percent in 2015. In 1994, the World Bank suggested three pillars of old age security programs which are non-contributory (basic pension), contributory (forced savings) and voluntary savings to provide help the old as well as helping the broader economy. By examining Australia’s experience in implementing pension programs, this paper attempts to (1) identify the advantages and disadvantages of non-contributory pension programs, and (2) provide an empirical comparison between universal and mean-tested pension programs. This paper argues that a non-contributory, means-tested retirement scheme, as has been implemented by Australia, would better support the old-age population by better targeting the beneficiaries, relatively low cost, and enhancing fairness among beneficiaries.

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