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FIAP > Boletín – Recientes > FIAP Pensions Note: Demographic trends make the PAYGO systems unviable – December 2017
18 December, 2017

FIAP Pensions Note: Demographic trends make the PAYGO systems unviable – December 2017

  • European societies are an example of aging processes, in which an ever more numerous population over the age of 65 can be observed (almost 20% of the total population). In the European Union, life expectancy at birth and life expectancy at 65 are increasing steadily, and people will live ever longer lives without disabilities (ability to work). Furthermore, many of the people who will live to an average of 100 have already been born.
  • Population aging is due to an increase in longevity, the drop in birth rates caused by fertility rates below the replacement level (less than 2.1 children per woman), the ever-decreasing number of women of childbearing age, and late motherhood (over the age of 30).
  • 8 Latin American countries are already below the generational replacement level of 2.1 children per woman; fertility has never been so low, and projections indicate that it will continue dropping to 1.77 children per woman by 2050. Furthermore, average life expectancy at birth for men and women will be 81 by 2050, intensifying population aging (the population aged 65 and over will be 19%, similar to the situation in the European Union today). Latin American demographic evolution will be similar to that of Europe, but faster.
  • The combination of low birth and fertility rates with high aging rates, translates into an ever-diminishing number of young people, and an ever-growing volume of senior citizens, entailing a significant imbalance between the active and dependent populations. In PAYGO pension systems, where contributors pay the pensions of those who are retiring, this imbalance will continue to increase, inhibiting the sustainability of the system.


Download the note in PDF here.

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