Ethereum blockchain and the plight of retirees worldwide

by Lumai Mubanga

It is not uncommon to read the following headlines in some national and private newspapers: “Retirees protest over unpaid retirement”, “Unpaid UNZA retirees to protest naked”, “Retirees Protest over Unpaid Retirement …” and “Southwestern Nigeria: Retirees protest unpaid pensions”. Of course, these are selected real headlines from Zambia and Nigeria, but the problem is worldwide. This article will discuss how the Ethereum blockchain can solve some of these endemic problems.

Mandatory pension contribution

In many countries, it is mandatory for every employee in government or private to make a monthly contribution of their earnings to a national pension’s scheme. Many are required to contribute a sizeable percentage into the national schemes for as long as they remain employed. Thus, many honest employees contribute up to their retirement age of about 55 to 65 depending on the laws of the land.

The rationale behind retirement schemes

In developed countries, many employees either died early or were forced to work until their early 60s. Upon retirement, they briefly lived with their children, and then died in their early 70s. To be old, it was stated, generally meant to be poor. Becoming disabled signified that poverty began earlier.

For developing and middle-income countries, one report stated that “older people faced much worse prospects. Incomes were substantially closer to subsistence levels and the capacity of children to support their parents was less”. As a result, death would strike earlier than expected and the famous expression applied more: A Life was nasty, brutish and short.

To counteract these imposed calamities, many governments created pensions schemes to help these employees financially after retirement. How effective have these pension schemes been?

A Failed Project?

The challenges of ex-employees are worldwide and for good reasons. Below is some excerpt from the press release, courtesy of ILO website:

Thus, the collapse of national economies, bad management, financial turmoil, and poor performance are often cited as the major reasons why retirees remain unpaid for years on end. While many senior government officials get their dues, poor civil servants are sacrificed for whichever reason may seem plausible.

Enters Blockchain

As complex as some of these challenges may seem to be, blockchain is set to overturn all this in the most simplistic of ways. First, the Ethereum blockchain will remove the central authority from managing these funds. Usually, the problem lies in governmental authorities diverting pension funds to what they feel are the pressing priorities. This diverging of funds is partly the reason why pensioners are not paid in time. Secondly, blockchain is designed to execute smart contracts when specific conditions are met. For example, when the employees have reached the pensionable age and have been consistently remitting contributions to the fund, the pension funds will be transferred to the pensioners account automatically. This would bring an end to all these delays and non-payments.

The biggest challenge though depends on how far the authorities are willing to effectively adopt and implement this technology to benefit their citizens. With goodwill, serious planning, the problem of unpaid retirees can be a thing of the past.