Participation in Pension Programs in Low- and Middle-Income Countries

Abstract Low-and middle-income countries are experiencing rapid aging, yet participation in pension programs remains stagnant due to widespread informal employment, posing a significant fiscal challenge. Some advocate for improving pension program design to boost contributions, while others support universal, noncontributory pensions. This study examines recent academic literature on the factors influencing active participation in pension systems within high-informality contexts. Emerging evidence indicates that participation is significantly influenced by both financial incentives and nonfinancial barriers. Simultaneously, pensions are not perfect substitutes for other strategies to mitigate longevity risk, such as family support, which will continue to be vital for many older individuals in fiscally constrained settings. Consequently, policymakers should consider integrating contributory pensions, social pensions, and policies that support other forms of elderly care, while examining how these elements interact. To guide these efforts, it is essential to systematically investigate these interactions and expand empirical evidence beyond a limited number of middle-income countries.