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Ageing Asia and the challenge for pension systems

Wednesday 12 May 2010 - by Daniel Sage


This will not be easy: a fully funded pension system needs to be supported by a strong financial market. Stuart Leckie says bond markets have been under-developed in Asia and, as a result, it is has been difficult to produce good annuity products. Subsequently, if governments decide to move towards funded systems, a more serious examination of the role of financial markets might be expected.

In recent years, evidence of regional pension reform can be found across most markets. China has recently enhanced pension portability by enabling workers to transfer schemes between provinces. In 2009, Malaysia introduced a new minimum pension and increased the pension age to 58. In Thailand, the government has implemented a new mandatory second tier of defined benefits.

Leckie says that as little as 10 years ago, governments were failing to recognise the challenge of ageing. Now, he says, problems are beginning to be discussed and so progress is being made. Still, Leckie says that pensions have failed to become “top of the priority list” and that governments still need to take reform more seriously.

OECD social policy division economist Edward Whitehouse holds a similar view. He says: “It is very hard to point to a single country’s system as an example of good practice. All countries continue to face at least one of the four problems outlined (by the OECD)”, such as low coverage and lump sums.


Although policymakers have begun to reform, it has been a slow start. While gradual change may be preferable to politicians faced with the twin pressures of short-term thinking and resistant populations, it is not a viable option for the long-term. If pension regulations are not changed to reflect this, the consequences may be profound.


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