Public–private pension mixes in East Asia: institutional diversity and policy implications for old-age security

Abstract

Previous studies of East Asian welfare regimes focus on similarities between social security schemes. In contrast, this paper explores cross-national variations in public–private pension mixes in six welfare states: China, Hong Kong, Japan, Singapore, South Korea and Taiwan. Our research echoes the pension policy analysis of international organisations but takes a step forward with emphasis on the historical and institutional characteristics of the respective pension systems. The analysis identifies three institutional patterns. First, the statist pension system (Taiwan and China) primarily relies on public pensions to provide old-age security, with private pensions playing a rather minor role. Second, in the dualist pension system (Japan and Korea) both public and private pensions work in parallel to ensure retirement income, though a clear security gap exists between workers in the formal and informal economies. Finally, the individualist pension system (Hong Kong and Singapore) is characterised by genuine fully funded individual accounts, emphasising citizens’ own responsibilities for ensuring old-age security. These three types of pension systems demonstrate distinct institutional characteristics and policy outcomes, illustrated by the juxtaposition of their institutional structures as well as by the comparison of key indicators collected from government reports and Organisation for Economic Co-operation and Development statistics. The paper concludes with a theoretical reflection of East Asian pension policies and a diagnosis of the distinct challenges confronted by each of the various pension patterns.

Social Security Around the World

“…There is no system that can satisfy everybody. In such circumstances, to be able to deal with the changes in population dynamics in a sustainable, suitable, and unified way, it is necessary to design policies so that they can fulfil specific standardsthis has been a big problem in countries such as Japan, where population aging is advancing (Chomik et al 2016;Fong 2017;Yeh et al 2020).…”

“…One of them is the basic structure of the system, i.e., issues such as reviewing the defined benefits pension plan or the introduction of some sort of a mechanism that would enable the system to be sustainable (Morgan and Long 2019; Fong 2017). The defined benefits pension plan, which used to be widely adopted in European countries, has, as a result of the increase in the proportion of beneficiaries against contributors, created exemption from liability without reserve accumulation (Yeh et al 2020).…”

“…Thus, a disruption of the policy balance between urban and rural areas is before our eyes. Furthermore, regarding the age of eligibility for pension benefits in Asia, while taking into consideration the fact that the average life span is relatively short, slowly raising the age from which pension payments begin should start soon, and the supply of older work force should be stimulated (Yeh et al 2020; see ▶ "Mandatory and Statutory Retirement Ages").…”

Presenting a new defamilization and familization framework for investigating the residualization of old‐age income security measures—The case study of Hong Kong

“…The target of these schemes is employees. The amount of pension income accumulated through these schemes is highly related to employees’ earnings (Yeh, Cheng, & Shi, ). These schemes serve to assist individuals to improve their life mainly through taking part in the paid labor market.…”

“…The Mandatory Provident Fund implemented in 2000 is an employment‐based, privately managed mandatory defined contributory scheme (Chou et al, ). Almost all full‐time employees aged 18–65 and their employers are required to contribute 5% of the employees’ monthly wage to a recognized private provident fund each month (Yeh et al, ). The main organizations that manage Mandatory Provident Fund schemes are government approved trustees belonging to private companies (Shi & Mok, ; Siu, ).…”