Basic, targeted and minimum pensions
Key results
Basic and minimum pensions along with social assistance are defined as the first layer of protection for the elderly within the pension system. They make up the first tier of the taxonomy of pension systems, which was set out in the previous indicator of the architecture of national pension schemes.
Basic pensions only exist in two non-OECD economies compared to five of the OECD countries listed. Five Asian economies provide a social assistance benefit equivalent to 8.1% of average earnings. Furthermore, five economies provide a minimum pension benefit, most often above the basic or social assistance level. For a full-career worker, the average minimum pension is 24.5% of average earnings.
There are three main ways in which economies might provide retirement incomes to meet a minimum standard of living in old age (Table 1.2). The left-hand part of the table shows the value of benefits provided under these different types of scheme. Values are presented in absolute terms – national currency units. They are also given in relative terms – as a percentage of economy-wide average earnings – to facilitate comparisons between economies.
Benefit values are shown for a single person. In some cases – usually with minimum contributory pensions – each partner in a couple receives an individual entitlement. In other cases – especially for targeted schemes – the couple is treated as the unit of assessment and generally receives less than twice the entitlement of a single person.
The analysis of benefit values can be complicated by the existence of multiple programmes in some economies. However, in non-OECD Asian economies this is very rarely the case as only India and Viet Nam have dual systems.
There are five economies that do not have either a basic or minimum pension within their system (China, Malaysia, Singapore, Sri Lanka and Thailand). Basic pensions exist in only Hong Kong, China and the Philippines, with the latter also having a minimum pension along with India, Indonesia, Pakistan and Viet Nam.
Table 1.4 reports the average wage (AW) levels for the year 2016. Average wages are displayed in national currencies and in US dollars (both at market exchange rates and at purchasing power parities, PPP). The PPP exchange rate adjusts for the fact that the purchasing power of a dollar varies between economies: it allows for differences in the price of a basket of goods and services between economies.
Wage earnings across the Asian economies averaged USD 9 660 in 2016 at market exchange rates. Singapore has the highest at USD 42 070, more than double the next highest in Hong Kong, China at USD 20 349 and nearly 30 times that recorded in Indonesia (USD 1 422).
At PPP wages averaged USD 20 432. Singapore is again highest amongst the Asian economies, at USD 70 800, with Malaysia next at USD 58 800. Indonesia is again the lowest at USD 4 692 but India Pakistan and the Philippines are also under USD 6 000. The higher figure for PPP wages suggests that many economies exchange rates with the US dollar were lower than the rate that would equalise the cost of a standard basket of goods and services.
Average wages for the OECD countries are much higher, averaging USD 36 622 at market exchange rates and USD 42 682 at PPP exchange rates. Australia has the highest wages at market exchange rates for those OECD countries listed at USD 59 134, with Germany highest at USD 61 451 for PPP rates, nearly USD 10 000 lower than that of Singapore.