Introduction

Public old-age pension systems were originally introduced to reduce the risk of poverty and income insecurity in old age. Today, most elders in high-income countries are covered by public pensions, and, as a result, in many high-income countries, older adults are less likely than the general population to be living below the national poverty line (Vos et al, 2008). Additionally, old-age inequality rates are significantly lower in countries with well-developed and resourced pensions systems (Barrientos, 2006; ILO, 2010). Such data support the ageingas-leveller hypothesis, with public programmes ‘rising the tide’ of older adults to a more equal playing field with a narrowed distribution of income (Crystal and Shea, 1990). Other researchers have documented life-course continuities, suggesting post-retirement status maintenance, where inequalities remain stable with age (eg Henretta and Campbell, 1976; Hardy, 2009). Alternatively, the cumulative advantage/disadvantage hypothesis posits that social class origins have enduring positive and negative effects that accumulate over time, resulting in increased inequality with age (Dannefer, 2003; O’Rand et al, 2010). These three hypotheses are important to consider, as recent cross-cultural research has demonstrated the extent to which formal pension schemes provide income security and its effect on post-retirement inequality varies significantly among nations (Disney and Whitehouse, 2003). First, there are large disparities in terms of pension coverage. While high-income countries in North America and Western Europe have coverage ratios that range between 50% and 90%, large parts of Africa, Asia and Latin America have substantially lower coverage rates, often less than 20% of the elderly population (see Figure 6.1) (ILO, 2010). Coverage ratios also vary within countries, with disproportionate numbers of low-wage workers and other vulnerable groups being without coverage (Vos et al, 2008). Second, there are large disparities in benefit adequacy. Benefits are often tied to contributions and mirror the adequacy of pre-retirement income. Pensions in themselves do not guarantee old-age security. In addition to problems linked to coverage and adequacy, demographic changes are also contributing to the problem of pension system sustainability. In high-income countries, 21% of the population is aged 60 years or older (United Nations, 2009). By 2050, almost 33% of the population will be aged 60 or older and 26% will be aged 65 or older.