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FIAP > Boletín – Recientes > Key parameters of public PAYGO pensio systems in 2023 / July 2024
23 August, 2024

Key parameters of public PAYGO pensio systems in 2023 / July 2024

Due to ongoing global population aging, the PAYGO systems are in serious financial straits. This has led many countries to constantly adjust their parameters, or allow their public finances to seriously deteriorate, creating situations that could become unsustainable over time.

To gauge the current and future situation of these systems, an update of the table “Some key parameters of public PAYGO systems” is presented for a group of countries in Europe, Asia and the Americas. Some of the trends found are the following:

  • The minimum retirement age in Europe in 2023 varies between 60 years and 6 months for women in Austria, and 67 for men and women in Greece, Italy and the Netherlands. The minimum retirement age in the Americas in 2023 fluctuated between 57 for women in Colombia and Panama) and 65 for men in Argentina, Brazil and Honduras, and for men and women in Canada, Costa Rica and Peru. The minimum future retirement age in Europe is 64 (France as of 2032), with no differentiation between men and women. Such differentiation does exist in most countries in the Americas however, such as Argentina, Brazil, Colombia, Honduras and Panama.
  • Contribution rates to public PAYGO systems vary between 6.5% in Honduras and 33% in Italy and the United Kingdom. They are generally higher in European countries, with an average of 23.6%, compared to an average of 16.7% for countries in the Americas.
  • All European PAYGO systems will be in deficit by 2025, with the exception of Portugal, which will have a surplus of 1.2% of GDP, and Finland, with a surplus of 1.6% of GDP. It is estimated that almost all of these countries will be in deficit by 2070, with Luxembourg having the biggest deficit of 8% of GDP). All countries in the Americas are projected to have deficits in the short and long term. Brazil (at 28.3% of GDP), Uruguay (at 11.9% of GDP) and Costa Rica (at 11.2% of GDP) stand out as the countries with the highest deficits by 2060.
  • Net replacement rates (OECD estimate for a worker earning the average wage of the economy), range from 36.1% (Ireland) to 98.8% (Portugal). The average net replacement rate in Europe is close to 74%, and approaching 66% in the Americas. The replacement rate is a consequence of all other parameters, such as the contribution rate, the retirement age, the deficit of the public system and the years of contributions required for accessing a full or partial pension.
  • Most countries require a minimum number of years of contributions to the system to access a full pension, fluctuating between 20 years (Hungary, Italy, Panama) and 45 years (Belgium).  Other countries, in turn, define a minimum number of years of contributions for accessing a partial pension, ranging from 1 year in France and the United Kingdom to 30 years in Belgium. It is important to note that those who do not meet the requirements for accessing a partial pension do not receive a contributory pension, and therefore lose everything they contributed during their working lives.
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