8.5 Expenditures on Noncontributory Pensions

FIGURE 8.5 Expenditures on Noncontributory Pensions

Sources: world bank calculations; ASPirE (Atlas of Social Protection indicators of resilience and Equity) (dashboard), world bank, washington, dC, http://datatopics.worldbank.org/aspire/; government data. Note: EAP = Elderly Assistance Program; gdP = gross domestic product; igNOAPS = indira gandhi National Old Age Pension Scheme; OAA = Old Age Allowance; OAbP = Old Age basic Pension; PAmA = Public welfare Assistance Allowance.

and 30 percent of per capita gross domestic product (GDP), respectively. In Maldives, benefits are equal to more than 2.4 times the national poverty line.6 In Nepal, benefit levels are equal to almost double the national poverty line.7 This suggests that the programs are not only a poverty reducing mechanism but are also intended to support a degree of consumption smoothing throughout the life cycle. By contrast, in Bangladesh, India, and Sri Lanka, the benefits are low, accounting for a small share of the poverty line. They are estimated at around 40 percent of the national poverty line in Sri Lanka and at only 11 percent of the national poverty line in Bangladesh.8

Expenditure trends mirror program coverage and benefit levels (figure 8.5). Expenditure is highest in Maldives and Nepal, which also cover the largest share of individuals ages 60+ and pay the highest noncontributory pensions in the region.

FUTURE OF NONCONTRIBUTORY PENSIONS IN SOUTH ASIA

The expansion of noncontributory pensions beyond current benefit and coverage levels will be difficult in countries in which the average age of the population is rising rapidly. To examine the future fiscal impact of population aging on noncontributory pension programs in the region, the analysis relied on a projection of a first scenario based on the assumption that expenditure increases will be caused only by population aging, that is, an increase in the number of individuals above the eligibility age (figure 8.6, panel a). Coverage rates will remain constant, and benefit levels will remain at a steady share of GDP per capita.