What becomes of the Brokenhearted: The Global Inequality of Pension Provisions

Jimmy Ruffin once asked 'What becomes of the brokenhearted', now the Risk institute is trying to answer that very question in developing nations.

Social protection of the older population is the most widespread income protection on the global scale, with approximately 2 in 3 above the pensionable age eligible for receipt of an old-age pension if the associated laws are enforced sufficiently. However, regional differences in the provision of income security are of extreme magnitude. Coverage of income protection for older generations is generally reduced in developing countries, where there exists a high proportion of informal and agricultural employment. Along with those who are unemployed or carrying out unpaid work, participation in available schemes is low.

High-income countries, such as Northern America and areas of Europe, have almost complete effective coverage of old-age protection, with all citizens of pensionable age legally covered by a pension. In comparison, less than 1 in 4 of pensionable age in sub-Saharan Africa are covered by income protection schemes.

Available pension plans may be contributory, non-contributory or a combination of the two. Approximately 1 in 3 of the global labour force pay into a pension insurance scheme, a rate which drops to 1 in 7 and 1 in 11 when considering the labour forces of Southern Asia and sub-Saharan Africa, respectively. Owing to the small proportion of formal contracts in low-income countries, formal employees are easily covered by contributory pensions. High levels of informal sector work, evasion of contribution and the inability to guarantee law enforcement associated with developing societies highlights the need for development in the coverage of non-contributory pensions.

Low labour market participation, elevated informal employment rates and periods of unemployment following significant events such as childbirth further reduce legal income protection coverage for women. Alongside insufficient retirement income, the risk of widowhood associated with the increased life expectancy of women is a significant issue in developing countries. For those whose husbands were covered by contributory pension plans, survivors’ pensions may form the only income source. Further to this, allocation of household assets often doesn't favour the bereaved wife. The capacity to obtain social protection is therefore increasingly limited in the event that a woman is widowed, unmarried or divorced.

The aim of my research is to improve social security systems for survivors, with a particular focus on orphans and widows. Preliminary investigation explores the existence of a condition which influences the joint mortality of coupled lives.

Broken-heart syndrome (a broken-heart does actually pose a risk of death) is a medically recognised condition triggered by severe events including natural disasters, winning the lottery and bereavement subsequent to the loss of a spouse. The condition is a form of short-term dependence which induces an increase in the mortality of the bereaved spouse generally greatest during the first period of bereavement, traditionally considered to be around one year. The magnitude of the increase diminishes significantly following this period, falling to the commonly lower mortality of a non-widowed population in some cases.

Our aim is to identify the existence of a variation in dependence structures between coupled lives inhabiting countries of differing levels of economic development. We are particularly interested in investigating how sociological characteristics, such as the importance of relationship-centred societies in developing countries, influence reactions to bereavement.

Simulation of the effect carried out during the investigation suggests the impact period is increased in a population representative of an economically developed country, with the comparative cohort reflective of a developing country appearing to recover from the condition at a faster rate. In each of the development levels considered, the bereavement effect, which describes the influence the initial loss has on the surviving spouse, is most significant amongst the bereaved male population. The mortality jump associated with this effect is greatest for bereaved males of an economically developed country.

Future research aims at investigating the influence of a negative event, such as a natural disaster, on the impact of the condition and the joint mortality of coupled lives within the affected population. We also aim to address the associated problems in the accurate pricing and valuation of insurance products involving mortality assumptions in developing countries.