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.

Table 1.2. Basic, targeted and minimum pensions, 2016

 

Relative benefit value (% of AW earnings)

Absolute value (units of national currency per year)

 

Relative benefit value (% of AW earnings)

Absolute value (units of national currency per year)

 

Basic

Minimum

Social assistance

Basic

Minimum

Social assistance

 

Basic

Minimum

Social assistance

Basic

Minimum

Social assistance

China

x

x

x

x

x

x

Australia

27.6

x

x

22 677

x

x

Hong Kong, China

9.8

x

19.0

15 480

x

29 940

Canada

13.5

x

19.2

6 879

x

9 803

India

x

12.1

2.4

x

12 000

2 400

Japan

15.3

x

19.0

780 100

x

970 380

Indonesia

x

12.3

x

x

3 600 000

x

Korea

x

x

5.5

x

x

2 400 000

Malaysia

x

x

4.3

x

x

3 600

New Zealand

40.0

x

x

23 058

x

x

Pakistan

x

39.3

x

x

63 000

x

United States

x

x

16.7

x

x

8 796

Philippines

3.4

27.5

x

3 900

31 200

x

 

 

 

 

 

 

 

Singapore

x

x

x

x

x

x

France

x

21.7

25.3

x

8 256

9 610

Sri Lanka

x

x

x

x

x

x

Germany

x

x

20.1

x

x

9 588

Thailand

x

x

4.1

x

x

7 200

Italy

x

21.3

19.0

x

6 525

5 825

Viet Nam

x

31.5

10.5

x

14 520 000

4 860 000

United Kingdom

22.2

x

x

8 122

x

x

Note: x = Not applicable.

 StatLink http://dx.doi.org/10.1787/888933873155

Table 1.3. Average annual earnings

 

Average earnings

Exchange rates with USD

Individual earnings (% average)

National currency

USD, market price

USD, PPP

Market price

PPPs

China

67 569

9 730

19 300

6.94

3.50

Hong Kong, China

157 800

20 349

27 254

7.75

5.79

Indonesia

19 200 000

1 422

4 692

13 499.50

4 091.831

Malaysia

83 496

18 613

58 800

4.49

1.42

Philippines

107 399

2 165

5 977

49.61

17.97

Singapore

60 888

42 070

70 800

1.45

0.86

Thailand

174 319

4 868

13 990

35.81

12.46

Viet Nam

46 100 000

2 025

6 096

22 769.00

7 562.94

 

 

 

 

 

 

India

99 349

1 462

5 665

67.97

17.54

Pakistan

160 280

1 537

5 579

104.30

28.73

Sri Lanka

300 000

2 021

6 595

148.44

45.49

 

 

 

 

 

 

Australia

82 114

59 134

56 016

1.39

1.47

Canada

50 997

37 935

40 181

1.34

1.27

Japan

5 110 601

43 692

50 086

116.97

102

Korea

43 857 243

36 328

49 071

1 207.26

894

New Zealand

57 649

39 912

39 756

1.44

1.45

United States

52 543

52 543

52 543

1.00

1.00

 

 

 

 

 

 

France

38 049

40 038

47 355

0.95

0.804

Germany

47 809

50 307

61 451

0.95

0.778

Italy

30 642

32 243

42 370

0.95

0.723

United Kingdom

36 571

45 100

52 731

0.81

0.694

OECD35

 

36 622

42 682

 

 

Note: PPP = Purchasing Power Parity.

Source: OECD pension models.

 StatLink http://dx.doi.org/10.1787/888933873174

End of the section – Back to iLibrary publication page