The Role of Pensions in Pakistan’s Social Security System

• Different countries define social security systems differently. A fairly

comprehensive definition was that used in Japan by the Advisory Council
on Social Security in a report of 1950 . This is as follows:

– "Social security systems mean the systems to enable every citizen

to lead a worthy life as a member of cultured society. Social
security systems provide countermeasures against the causes for
needy circumstances including illness, injury, childbirth,
disablement, death, old age, unemployment and having a lot of
children by implementing economic security measures through
insurance or by direct public spending.

– Social security systems ensure the minimum level of living to the

needy by public assistance, and they also promote public health
and social welfare."

Components of a Social Security System

• Old-age, invalidity and survivors

– Pensions or, more completely, Retirement Benefit Schemes

• Employment Injury

• Sickness and Health-care

• Unemployment benefits

• Family benefits
Where Does Pakistan Stand ?
 Not currently at a desirable level with respect to our social security
system including, more particularly, our arrangements for retirement
benefits/ savings

• Historically the social security “system” in the country (and, for that
matter, in the region) has been largely family based, with the family
stepping in in times of need

– More particularly children support parents after retirement.

• Is this system sustainable in the long run ?

– Perhaps not as trends are beginning to change.

– As family sizes shrink and the population ages there would be

increased pressures on the working population which, almost
certainly, will cause severe social strain unless supported by a
credible social security system.

Retirement Benefit Schemes – Role

• The basic purpose of retirement benefit schemes is to provide financial
resources after retirement

– The prime role is, therefore, social

– The requirement for the government/ employers to provide of

retirement benefits is, therefore, often a part of social security
legislation

– There is also a savings element – deferring consumption of earnings

for a time when earnings disappear but there is still a need to
consume.

• Various models for providing pensions exist throughout the world,

ranging from full responsibility resting with the state (in socialist
 economies) to economies where very little is done by the state, with the
exception of public servants

• Systems are, however, becoming increasingly standardized, not least

because of the intervention of international lending agencies, who are
promoting a standard model for pension schemes, based on a “multi-
pillar concept”