The report summarizes existing population aging trends in developing countries, discusses the main advantages of the individually funded model in this demographic context, and reviews several important design considerations for implementing this model in developing countries. Although it emphasizes the fact that developing countries face major challenges in terms of income security in old age (for example, most of these countries do not have large and mature public pension programs for addressing the rapid aging of the population), the report concludes that these countries have opportunities for designing and implementing new social security programs that address future old-age income. The report argues that these countries should seriously consider implementing an individually funded model, since it could generate a higher replacement rate for future pensioners, reduce long-term pressure on fiscal budgets, and accelerate the development of robust capital markets. The report points out that a “one system or the other” type choice is not necessary, since many countries have the option of constructing pension systems comprising multiple pillars.

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