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FIAP > Boletín – Recientes > Progress of the Pension Systems No. 1 2019 / December 2018 – January 2019

Progress of the Pension Systems No. 1 2019 / December 2018 – January 2019

14 March, 2019
  • Crisis in the PAYGO systems worldwide. In Brazil, the recession advanced the social security deficit forecast for 2037 to 2021. According to the experts, this warrants a more thorough reform of the pension system to avert its collapse. In Ecuador, the Government is proposing additional workers’ contributions due to the crisis in the Ecuadorian Social Security Institute (IESS). Another alternative under study is to increase the number of years of contribution to capitalize the retirement and health funds. In Spain, pension expenditure in 2019 will increase to EUR 153,864 million, 6.2% more than in 2018, historically the highest figure, due to which Social Security will receive an additional transfer of EUR 850 million from the government. It was also announced that the Social Security debt had doubled between 2016 and October 2018 (from EUR 17,173 million to EUR 37,800 million). Finally, in Nicaragua, a new social security reform that that comes into effect in February will increase the contributions of companies, workers and the State, and adjust the formula for calculating old-age pensions, reducing them by between 30% and 45%.
  • Chile: The Government is pushing for the reform of the pension system to become law this year and has opened up to the possibility of negotiating certain issues, such as the management of the 4% additional contribution for individual accounts and raising the contribution rate of additional individual savings to 5 % or more. Meanwhile, the law that makes it mandatory for self-employed workers who issue fee slips (for an annual gross amount equal to or greater than 5 minimum monthly wages) to contribute to Social Security as of April 2019. The President also signed a bill making it mandatory for civilian personnel joining the Armed Forces to enroll in the individually funded pension system.
  • Mexico: The new administration sent a reform proposal to Congress, which among other issues seeks to transform the mixed commission system (% on the balance and % on returns), replace the Investment Companies Specializing in Retirement Funds (Siefores) with life cycle investment funds, and encourage voluntary savings. Furthermore, according to CONSAR, during its administration the new government intends to carry out a reform to increase the mandatory contribution rate from 6.5% to 10.5% or 14%, increase the retirement age from 65 to 68 and reform the defined benefit pension systems to convert them into individually funded account systems (in the case of some states, municipalities and universities).

Download this version of the Progress of the Pension Systems in PDF here.

 

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