Prepared or Pressured? Pension Policy Readiness and Demographic Ageing in 154 Countries

Abstract

This paper develops a comparative framework for assessing whether pension systems are institutionally prepared for demographic ageing. It constructs a Policy Readiness Index (PRI) capturing retirement age, contribution effort, and institutional breadth, alongside a Demographic Pressure Index (DPI) measuring ageing exposure. Using data for 154 countries, the paper reveals four findings. First, policy readiness is shaped primarily by institutional design rather than demographic conditions. Once pension policy characteristics are accounted for, old-age dependency ratios and life expectancy do not independently predict readiness. Second, countries cluster into four preparedness-pressure regimes: Prepared, Resilient, Window for Reform, and Vulnerable, reflecting different combinations of institutional capacity and demographic exposure. Third, 89 percent of African countries fall within the Window for Reform regime, characterized by low demographic pressure but weak institutional preparedness. The principal constraint is institutional breadth, particularly limited social pension coverage and weak contribution structures, rather than retirement age itself. Fourth, the framework is robust to alternative weighting schemes, with rank correlations exceeding 0.98 across specifications. The findings suggest that demographic ageing does not mechanically determine pension vulnerability. Institutional preparedness mediates demographic exposure, and countries with favorable demographics but weak pension institutions face a narrowing window to build systems before ageing pressures intensify.