Three tests Pakistan's social protection system must pass

This week I am in Bangkok at ESCAP, the United Nations Economic and Social Commission for Asia and the Pacific, for two meetings on population ageing. The first prepares the Fifth Review of the Madrid International Plan of Action on Ageing (MIPAA), the plan that 159 governments, Pakistan among them, signed in 2002. The second is the Committee on Social Development (CSD), where the region's governments set priorities every two years. In both meetings the question is the same: how do we protect older people without placing an unfair burden on other generations?

The Asia and the Pacific region has 748 million people aged 60 and over today. By 2050 it will have 1.33 billion, one person in four. Leaving aside China, where pension receipt is almost universal, nearly one in two older persons in the region has no pension at all. In Southern Asia, more than half receive nothing. Pakistan is the clearest case.

Social protection is wider than pensions: it covers health, children, disability and care. But old age is where a system shows its true character. In Bangkok, as an invited speaker, I will propose three tests for any such system. Passing one or two is not enough.

The first test is fiscal responsibility. Can the promise be paid for, year after year, without leaving the bill to our children? Pakistan fails it in an unusual way: we spend a great deal on very few older people. The federal pension bill this year is Rs1.055 trillion, and it has been growing by 20 to 30 per cent a year. Yet the government collects in tax only 12.3 per cent of what the economy produces, against nearly 20 per cent across Asia and the Pacific. A promise that grows by a quarter every year, on a tax base that hardly moves, cannot be sustained.

Since July 2024, new federal employees pay 10 per cent of their salary into a fund and the state adds 12 per cent, so that their pensions are saved for in advance. That is a real reform, but it protects the budget of 2055, not the older person of 2026.

The second test is social adequacy. Are benefits enough to live on with dignity, and can older people reach the health care and support they need? The Employees' Old-Age Benefits Institution, our only national pension for private-sector workers, pays old-age pensions to about 323,000 people, and its minimum pension of Rs11,500 a month is less than a third of the minimum wage. HelpAge International estimates that only 3 million of our 15 million older people receive any pension, and that two in three older women have no income of their own.

Viet Nam showed last year how fast a country can move. In a single law it lowered the age for its social pension from 80 to 75, cut from 20 to 15 the years of contributions needed for a full pension, and brought three million more workers into the system.

The third test is intergenerational fairness. Are costs and opportunities shared fairly between young and old? Pakistan is the youngest large country in the region: 17 million people aged 60 and over today, under 7 per cent of the population, and 36 million by 2050, still under 10 per cent. I argued in these pages that we have been slow to use this demographic window: our workforce has doubled in thirty years, while the output of each worker has grown by only half. A window pays only if people work through it, and work productively.

Count who actually works, not who is of working age. For every 100 people in work in Pakistan there are more than 200 who are not. In Japan, the oldest country in the region, there are about 80. Age does not decide the burden. Jobs do, and what each job produces.

Our fairness problem, then, is not that the old take from the young. It is that a small formal minority, mostly in government service, enjoys protection that everyone pays for, while the informal majority, more than 70 per cent of our workers, will grow old with nothing. ESCAP has begun tracing who actually receives public money, by age and income. In Viet Nam, the richest quarter of older people received 18.5 times the public pension money of the poorest in 2018; by 2022 it was 8.5 times.

What should Pakistan do? I have argued for a federal Senior Citizens Act, a universal pension paid from taxes rather than contributions, a National Commission on Ageing and proper geriatric care. The three tests show how to judge them. A basic pension for every older person who has none, set against the poverty line and raised each year with prices, would pass the adequacy test; the ILO puts the cost of such a floor, across the whole region, at 0.2 per cent of GDP. The EOBI reform now under discussion, which would open the scheme to the self-employed and domestic workers and require an independent check of its finances every three years, would strengthen the fiscal test. And publishing each year what pensions are worth, by province, sex and type of work, would keep the fairness test honest.

In Bangkok, I would like to say that Pakistan, the youngest nation at the table, has chosen to prepare for old age while it still has time. Those who built this country, in its fields, factories, schools and homes, have earned a dignified old age. A nation that keeps that promise to its elders can make its promise to the young with a clear conscience. The three tests will show whether we mean it.