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FIAP > Boletín – Recientes > Key parameters of the public PAYGO systems 2022 / June 2023
17 August, 2023

Key parameters of the public PAYGO systems 2022 / June 2023

Due to the ongoing aging of the world’s population, the PAYGO systems are in serious financial straits. This has led many countries to constantly adjust their parameters, or to seriously deteriorate their public finances, leading to a situation that could become unsustainable over time.

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

  1. The current minimum retirement age in Europe in 2022 varies between 60 (women in Austria) and 67 (Greece and Italy, men and women). However, the future minimum retirement age will be 64 in Europe (France as of 2030) and there will be no differentiation between men and women. The most notable increases in the retirement age in the last year occurred in the Netherlands (3 months), Spain (2 months) and Germany and Portugal (one month). There are no significant changes in the minimum retirement ages of countries in Asia and the Americas.
  2. The contribution rates to public PAYGO systems vary between 6.5% (Honduras) and 33% (Italy) and are general higher in European countries (the average in European countries is 23%, compared to an average of 16% in countries in the Americas).
  3. All European PAYGO systems will be in deficit by 2025, with the exception of Portugal (with a surplus of 0.4% of GDP) and it is estimated that almost all these countries will remain in deficit by 2070 (the country with the largest deficit in that year would be Luxembourg, with 8.1% of GDP). All countries in the Americas are expected to be in deficit in the short and long term, with the exception of Canada (which is balanced). The countries in the Americas with the largest deficit by 2100 will be Costa Rica (212.6% of GDP) and Brazil (26.2% of GDP).
  4. Net replacement rates (OECD estimate for a worker earning the average wage in the economy) range between 30% (Peru) and 102.7% (women in Brazil). The replacement rate is a consequence of all other parameters such as the contribution rate, retirement age, public expenditure, and the number of years of contribution required for accessing a full or partial pension.
  5. Most countries require a minimum number of years of contribution to the system to obtain a full pension, and this varies between 20 years (Hungary, Italy, Panama) and 45 years (Belgium). Other countries, in turn, require a minimum number of years of contribution to access a partial pension, ranging from 1 year (France and the United Kingdom) to 30 years (Belgium). It is important to note that those who do not meet the requirements for obtaining a partial pension do not receive a contributory pension and therefore lose everything contributed during their working lives.
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