What does it mean for governments to engage older people and why is it important?
There is great inequality within and across countries in the individual financial situations of older people. Many older people are not in a position to meet their living expenses once they retire from their primary source of income generation without support. However, there are productive measures that governments around the world are taking to ensure the financial needs of older people are met. The IFA collectively term this government response as strategies for the “financial protection of older people”. These strategies are designed to enable older people to sustain a quality of life as they age. This is achieved in two ways, through the provision of adequate minimum income, and through the reduction of the expense of living.
The state-run pension system is the primary vehicle employed by governments in the developed world and in certain developing countries to support older people financially. These systems can be funded in two ways; through individual contributions, or from general government revenue. However, governments in developing countries rarely have the resources to implement complex income payment schemes and indeed access to pensions is not always universal even in the developed world. Further, pensions are often most often designed to serve as income supplements to compliment personal finances, though in many instances they serve as the primary income source for older people. Ensuring access to adequate financial resources is one of the greatest challenges facing governments today.
It is a challenge for many countries to extend financial protection to the most vulnerable groups of older people. Global cooperation, particularly between governments and international financial institutions like the World Bank, provide a model for developing financial protection schemes through cash transfers and partnerships that target vulnerable and low income individuals. In this instance, the importance of financial protection is framed not only in terms of the right to adequate means, but also through a development lens of poverty reduction and economic growth.
Successful financial protection strategies extend beyond the redistribution of assets through pensions. The provision of personal income must compare with personal expenses, which can be reduced through such measures as tax breaks and controls on the price of basic necessities such as medication and housing. Sound fiscal policies that ensure economic stability and maintain currency values are also extremely important for older people, as they and their traditional support structures of family and community are vulnerable to market failings.
Financial protection systems must be fiscally sustainable in both the short and long term. These systems must balance the provision of benefits to older people without burdening future generations. Maintaining such a balance challenges governments in all regions to consistently reform their financial protection systems to match shifting demographic and marketplace fluctuations. In recognition of the various models and pressures for system reform, the IFA believes that it is important to maintain focus on and reaffirm the commitment to meeting the objectives of protecting older people.