In the absence of reforms, the growing middle class may be vulnerable to poverty in old age
Experts and policy makers gathered today at the Inter-American
Development Bank (IDB) to discuss the future of pensions in Latin
America and the Caribbean. A panel discussion moderated by CNN
journalist Gabriela Frias explored different policy approaches to ensure
greater coverage and sustainability of pension systems in the region.
The event marked the launch of
Pensions at a Glance: Latin America and the Caribbean,
a report co-published by the IDB, the Organization for Economic
Cooperation and Development (OECD), and the World Bank. The study
provides detailed comparative indicators of pension models in 26
countries.
Population aging will lead to higher spending on pensions in Latin
America and the Caribbean; at the same time, the high number of workers
in the informal sector, who do not make contributions, put the adequacy
of pension benefits at risk. Currently, only 45 out of every 100 workers
contribute to a retirement plan, and this ratio has hardly changed in
recent decades. By 2050, between 63 and 83 million people in the region
will be at risk of not receiving an adequate pension, unless pension
systems are reformed and efforts are made to increase formal sector
employment and access to quality education.
"We must act now to ensure the future of pensions in the region,"
said IDB President Luis Alberto Moreno during the inauguration of the
event. "Right now we are enjoying a demographic dividend that cannot be
missed. If we get more people to contribute to our pension systems, and
if we adjust the systems to rising life expectancy, we will be able to
provide adequate coverage to future generations. "
“Governments need to boost employment opportunities in the formal
sector, especially for women, so that more people can build future
pension entitlements in their own right”, said OECD Secretary-General
Angel Gurría opening the event. “Too many people in the region are still
excluded from the pension systems. Further reforms are needed to
broaden pension coverage to ensure an adequate income at retirement.”
The most widespread practice to bridge the gap in pension coverage is
expanding the so-called non-contributory pensions. These government
subsidies help reduce inequality and poverty, but will pose a fiscal
challenge as the population ages and the number of beneficiaries
increases. Today there are 8 people of working age for every retiree
but, by 2050, the rate will drop to 2.5, close to the OECD average of
1.9.
Many countries in the region still lack systems and institutional
capacity for sound management of pensions, both contributory and
non-contributory. In that sense, larger investments in systems and
reforms of institutional frameworks are important steps towards
achieving greater pension coverage and sustainability.
Pensions at a Glance: Latin America and the Caribbean provides
a detailed analysis of the systems in 26 countries, focusing on their
structures, rules and parameters. The report also includes up-to-date
information on the last wave of pension reforms, as well as key
comparable indicators of demography, public spending and pension rights.