Lesotho, a small country completely surrounded by South Africa, in November 2004 began to provide its citizens aged 70 and older with a non-contributory Old Age Pension. The OAP was pension-tested, but not tested against other family income or assets.
OAP monthly benefits have increased over time, and are now equal to 40 US dollars (37% of per capita GDP). For a county as poor as Lesotho, this is a very generous pension. The age of eligibility, however, remains 70 years.
Lesotho’s Old Age Pension from the beginning excluded existing pensioners, so was not universal. I was very pleased to see a recent note, published by the ILO, with the title “Lesotho: Universal Old Age Pension”. Is it possible that Lesotho has removed the pension test for its social pension?
The Old Age Pension (OAP) is a tax-based scheme for all older persons . ….
With more than 4 per cent of its population above the age of 70, Lesotho has a larger share of older people than many countries in sub-Saharan Africa. All citizens of Lesotho over 70 years of age are entitled to a monthly pension benefit of 550 Lesotho Maloti (LSL), equivalent to US$40. The OAP was introduced to lift older persons out of poverty and is the largest regular cash transfer in Lesotho, covering about 83,000 persons (4.5 per cent of the population). While coverage of eligible persons is approximately 100 per cent, it is estimated that many more benefit indirectly .
Prior to the OAP’s introduction, only war veterans and civil servants received a pension, covering less than 3 per cent of older persons in Lesotho. ….
The Pensions Unit … transfers funds to around 300 payment points across the country on a monthly basis. ….
On a few occasions, remote payment points were served by helicopter because of weak road infrastructure. The national army provides security at service points and while transferring the money. ….
Although OAP utilizes existing structures and government actors, the administrative costs are estimated to be quite high at around 20 per cent.
Thea Westphal, “Lesotho: Universal Old Age Pension“, International Labour Office (ILO), Country Note Series (March 2016).
After much searching, I was unable to confirm removal of the pension test. Lesotho’s social pension scheme most probably is still a universal minimum pension. It is close to universal only because few older people have any other type of pension. The implicit coverage, reported in the ILO note, of 112.5% (4.5/4) of age-qualified residents might reflect an underestimate of the population aged 70 and older, inclusion of persons younger than 70 as eligible beneficiaries, or – more likely – some combination of both errors.
I was surprised to learn that the administrative costs – at 20% of benefits – are so high. This might be due to the high cost of delivering cash payments to pensioners, especially those who live in remote areas of the country.
Earlier TdJ blogs on Lesotho are posted here.