• In the PAYGO pension schemes, the contributions of active workers are used to pay the pensions of current pensioners, so their operation will be heavily dependent on the number of people of working age for each retiree, i.e. the old-age dependency ratio (DR).

• Worldwide dependency rates: When studying the worldwide situation, the analysis by continent reveals that:
• Although there are regions with younger demographics than others, the DR will decrease (the population will age) in all regions worldwide.
• Asia and Latin America will age very quickly in the coming years. In fact, Latin America will become the longest-lived region in the world alongside Europe in 2100.

• Contribution rates that would be needed to achieve a replacement rate of 70% in a typical PAYGO system: In 1950, PAYGO systems were able to pay pensions without major problems. However, by 2050, an average rate of 42% would be needed for Europe, while in Latin America 25% would be needed, on average, in Chile 35.6%, in Costa Rica 31.6% and in Uruguay 31%. DR rates will increase even more by 2100. DR rates close to 50% would be needed in Europe and Latin America. Costa Rica, El Salvador, Mexico, Chile and Uruguay would need DRs bordering 60%.

• Comparative demographic effect on PAYGO systems versus individual savings systems: Aging in Latin America would generate a 52% drop in pension amounts in PAYGO systems, whereas the drop in individual savings systems would be 24%.e., the demographic impact on pension amounts in PAYGO systems is more than double the impact in individually funded systems in Latin America. This difference is consistent across FIAP member countries.

• All of the above implies that the PAYGO systems must be fully or partially replaced with individual savings systems, or voluntary individual savings mechanisms must be progressively incorporated to make them sustainable.

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