The pension income is generated through a lifetime of contributions from one’s own labour. Such earned pension income entitlement depends critically upon three factors: 1) how long you have contributed; 2) over what trajectory of your earnings; and 3) under what pension income system. A number of issues arise in guaranteeing pension income entitlements in countries like Pakistan.

First, many people are not fortunate enough to be covered by a pension system. They fail to contribute during their working life to draw an income in old age. The low coverage of pension system is observed typically for low income, informal workers, while public sector employees may typically enjoy a generous pension income reward.

Second, those who happen to contribute may not be able to draw adequate pension income to afford a respectable living standard upon retirement. Old age income poverty is prevalent in the country. This forces many older persons to continue working when they should in fact be retiring.

Third, the pension systems in place are not designed in a manner that they remain financially sustainable in the future. Pakistan is one of the few countries in the world where we still have unfunded pension systems, which implies that we risk not meeting the pension entitlement contract in the future.

We need to reform our system, learning from the lessons of many countries around the world that are currently busy reforming their pension system.

Let us take a tour of the relevant statistical landscape. Pakistan is one of only 15 countries worldwide with more than ten million older people. It is estimated that currently seven percent of the population (about 14 million) is over 60 years old. A fast-rising life expectancy means that the population of older people in Pakistan is predicted to increase to 16 percent or 44 million by 2050. The rising number of older people poses new challenges for an adequate understanding of pension income challenges for older people in Pakistan.

Our pension bill is rising exponentially, for both federal and provincial pensioners, and for both civil and military retirees. The funding base remains the tax revenues that are failing to match the rise in our financial obligations. For example, during the last decade, government retirees were the main beneficiaries and their number increased by 25 percent, and the pension bill increased by 432 percent from Rs 55 billion to Rs 238 billion. This shows that the costs of government pensions, while only benefitting a small proportion of the employees, are rising exponentially and have increasingly become unsustainable at both the federal and provincial levels.

So, how do we go about fixing our country’s pension problems? I would like to draft a thick report on the problem statement and argue in favour of a whole range of pension reforms. For now, I restrict myself to one policy option: the first and foremost policy reform should be to root out the practice of early retirement. 60 as the age of retirement is criminally young. There are also incentives in the system to retire even sooner. We must extend the retirement age in Pakistan, gradually, to 65. We need to introduce actuarial fairness in granting additional benefits for those who delay their retirement.

And, what might be the challenges in extending the retirement age? We need to assure that the continuation of employment beyond 60 is linked to productivity, for which we need to put in place age-friendly work environments. We need to root out age-based discrimination in offering on-the-job training to older workers and in-job mobility. Rise in earnings beyond the age of 60 should be linked only to productivity growth.

Some might say that the rise in retirement age is not a feasible policy option given the high youth unemployment in the country. This is a fallacy: the increase in the retirement age and the higher maturity of workers with age will enhance the overall economic activity in the economy. Thus, the rising tide will lift all boats and we will be able to offer more jobs to both young and older workers alongside the rising retirement age.

The writer is the vice chancellor of Government College University, Lahore. He is also an associate professorial fellow at the Oxford Institute of Population Ageing, University of Oxford, the UK. Previously, he has been a professor of social gerontology at Seoul National University, Korea, and a professor at the London School of   Economics and Political Science, London