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FIAP > Boletín – Recientes > Progress of the Pension systems N°2 – March April 2023
24 May, 2023

Progress of the Pension systems N°2 – March April 2023

Relevant studies:

  • Responsible investment: A Government study shows that pension fund managers in several LATAM countries are actively advancing the implementation of ESG factors in their investment processes. In addition, a study by the Uruguayan National Association of AFAPs  reviews some positive international experiences on this topic (Mexico, Chile, Colombia, United Kingdom, Australia and the USA).
  • Emergency savings: A study shows that the UK Emergency Savings Pilot program has successfully improved the financial well-being of participating workers and accumulated pension savings for short-term use.

Crisis in public PAYGO systems and/or State-managed systems worldwide. In Bolivia, several sectors have protested against the nationalization of individual pension accounts management, fearing arbitrary use of workers’ savings by the government through the Public Social Security Manager. In Costa Rica, the Costa Rican Social Security Fund (CCSS) has stated that the PAYGO system will face liquidity problems by 2026 if no adjustments are made. In China, the government has indicated that it will seek to gradually raise the minimum retirement age (currently 60 for men and 55 for women) in response to the demographic crisis facing its public PAYGO system. In El Salvador, the government cut US$234 million from the fund for the payment of the public pension debt in 2023 and used it to finance expenses prior to the 2024 elections, transfers to Municipalities and other expenses, according to official Ministry of Finance data. In USA, according to a NORC survey, only 2 out of 10 people believe that the benefits of the PAYGO social security program will be available to them when they need them. In Panama, finally, the public PAYGO system, whose current deficit is close to US$1.2 billion, could exhaust its funds by October this year, according to a Social Security Fund (CSS) report.

France: In April the government approved a pension reform that will take effect in September, which gradually increases the minimum retirement age from 62 to 64 years of age by 2030, and the number of years of contributions required for accessing a full pension from 42 to 43 by 2027.

Spain: In March the government approved a pension reform for calculating old-age pensions that enables opting for the best years of contribution in the last 25 years, or the last 29 years, discarding the 2 worst years (only the first option was available until now); increasing the supplementary gender gap allowance; extending the period of application of the intergenerational equity mechanism from 2032 to 2050, increasing its percentage from 0.6% to 1.2%; and establishing a contribution surcharge for people with higher salaries, ranging from 1% in 2025 to 6% in 2045.

Uruguay: In April, Congress approved a pension reform that gradually increases the minimum retirement age from 63 to 65 years of age; modifies the contributions to the pension system (the contribution to the PAYGO system increases from 7.5% to 10%; and the contribution to the individually funded system diminishes from 7.5% to 5%), while considering the average of the best 20 years of contributions for the calculation of old-age pensions (instead of the previous formula: the most favorable between the average of the 20 best years and the average of the last 10 years).

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