COVID and Pension Planning Worldwide 2

 In an interesting article in the Asia Pacific Forum, Odusote Fatimah Abolanle and Alfred Muluan Wu write.

The COVID-19 pandemic has complicated pension reforms in many countries. Worse yet, recent reforms in some countries put them at risk of further harm in the event of a another catastrophe like COVID-19.

For instance, a recent wave in pension schemes in many regions of the world shifted the risk and financial burden to employees and erased the state support system. In a normal environment this would already put employees at risk, but in a pandemic, it has been a disaster for inequality. Further, the vulnerability of low-income earners in the informal sector, especially in developing countries, has risen, compounding this global problem.

To deal with the impacts of COVID-19, many countries have had to create buffering mechanisms within the existing pension systems to alleviate the pains of its workforce. Some of these responses include allowing an early withdrawal of pension contributions, a reduction or deferral of contributions by employees and/or employees, provision of a subsidised pension, and the provision of a non-contributory pillar for unemployed.

For instance, the early full or partial withdrawal of pension contributions was initiated by Ghana for the self-employed and people who have permanently lost their jobs, and in India for those that are ill or have lost their job. Similar provisions have also been implemented in Australia, Malaysia, and Iceland.

In some countries, governments enacted policies to reduce or defer the contributions by workers to their pension account. In Thailand, social security contributions by employees – and also for employers – were reduced from five to four percent.

In India, those earning a basic salary of 15,000 rupees (approximately $280) per month will contribute 10 percent, rather than 12 percent of their monthly salary to the Employee’s Provident Fund from May until August. But those working with the central government were exempted.

In Malaysia, the mandatory monthly contribution to the Employee Provident Fund (EPF) by workers were reduced from 11 percent to seven percent.

Some governments have temporarily postponed or reduced pension obligations by employers in an attempt to mitigate the negative impact of COVID-19. For instance, the People’s Republic of China allowed for deferral or reduction in the employer contribution rate, depending on the location of the company within China, the size of the company, and the sector.

Vietnam also announced the suspension of mandatory contributions by some enterprises experiencing difficulties with COVID-19, based on the degree to which they are affected.

 The French government announced the deferral of social security and retirement contributions from May