According to the report, Uruguay has a pension system of common regime, based on the following four pillars: solidarity, PAYGO, mandatory savings and voluntary savings. In that sense, the text explains the two major reforms of the system, in addition to carrying out a diagnosis of the PAYGO system.

The first major reform to the Uruguayan system occurred in 1995, where an individual savings pillar was introduced to complement the existing PAYGO pillar. The second reform occurred in 2023, where its main reason was to address the challenges faced by the PAYGO pillar.

Regarding the Uruguayan system, it had a good diagnosis in 2020, due to having a good ranking and a good replacement rate, which was located at 64% of the average salary for men. However, maintaining the PAYGO system was unsustainable over time, due to the aging and high spending of the Uruguayan state, where in order to sustain the PAYGO pillar and the solidarity pillar, the State had to spend 11.2% of GDP.

Due to this problem, the 2023 reform (which does not increase the contribution rate because it is already high) consists of the following. First, the increase in the retirement age, going from 60 years to 65 in a progressive transition. Second, the formula for calculating the benefits of the PAYGO system was changed. Third, the contribution rate remained intact but the contribution rate to the PAYGO system was increased, where before the law, from the 15% personal contribution of the salary, half (7.5%) went to the PAYGO pillar and the other half (7.5%) went to the mandatory savings pillar, but after the reform, 10% is allocated to the PAYGO system and 5% to mandatory savings. Finally, the “Cajas” that continued to exist in Uruguay, which were exclusively of PAYGO structure, moved to the common regime that combines PAYGO and individual savings.