What are you searching?

FIAP > Boletín – Recientes > Pensions Progress Report No. 4 – 2019 / June-July 2019
16 October, 2019

Pensions Progress Report No. 4 – 2019 / June-July 2019

  • Crisis in the PAYGO systems worldwide. In Argentina, the government began using money from the Sustainability Guarantee Fund (SGF) to balance public accounts and meet the fiscal goals promised to the International Monetary Fund (IMF). The Treasury took USD 20 billion from the FGS to achieve a surplus in the first half of the year and plans to use another USD 60 billion in the future. In Brazil, the Social Security deficit of the states more than doubled in four years. Having been excluded from the pension reform approved in the first round in the House of Representatives, the States will have to deal with a pension deficit of R$ 144.6 billion (approx. USD 37,176 million) this year. In Uruguay, a government report states that the liabilities to assets ratio will grow by 50% over the next 30 years. Thus, the country is today facing a “turning point” in the rate of increase of this ratio, which imposes serious sustainability challenges on the pension system.
  • Chile advances in agreement with Peru and Colombia for international portability of pension funds. In the particular case of Colombia, the possibility of fast tracking fund portability is being considered.
  • In Chile, the Pension Reform bill of law took the first legislative step after being dispatched by the Labor Commission of the Chamber of Deputies. Among other measures, the reform proposes creating the Social Security Administrative Council (CASS), as an autonomous body, whose purpose will be to tender the 4% additional contribution to at least 2 companies with a sole line of business, among other functions.
  • In Colombia, the Government is holding technical round tables aimed at structuring the pension reform bill of law to be submitted at the end of this year. Furthermore, a Banco de la Republica report came to light, proposing a formula for raising the retirement age and the contribution rate, but reducing the number of weeks of contributions, since it considers this requirement as one of the impediments to achieving a pension in the midst of the high informality that characterizes the country’s labor market.
  • In Mexico, Principal has proposed that the reform of the pension system should consider the following pillars: (i) Welfare, to help those who cannot save; (ii) Promote voluntary savings, not only in the AFORES, but in any agency that allows long-term savings; (iii) Increase the mandatory contribution rate (the current rate of 6.5% is very low); and (iv) Issue labor regulations that allow people who can and want to work at retirement age, do so.
  • In Peru, the Ministry of Economy and Finance approved the installation of a Council and the IMF has proposed raising the mandatory contribution rate. The Council, among other functions, will fully evaluate the principal conditions of the public and private pension systems. Meanwhile, an IMF report recommends among others: (i) raise the mandatory contribution rate from the existing 10% to 13% or 14%; (ii) implement workers’ contributions linked to their consumption; and (iii) establish “matching contribution” schemes.

To download this Pensions Progress report, please click on this link.

Suscribe to the Fiap International Newsletter Sign up here