• Crisis in the PAYGO systems worldwide. In Argentina, the IMF has insisted on increasing the retirement age and reducing the replacement rate. In Colombia, the IDB’s representative in the country said that the public social security system will only be viable until 2050. In Costa Rica, the Government will resort to issuing debt bonds to pay the nearly 62,000 pensions charged to the National Budget this year. In Ecuador, IDB data reveals that the public pension system has low coverage for retirees (only 15% of those who meet the basic requirements for retirement receive a public pension), and represents a high state subsidy expense (70% of pensions received by retirees come from the State subsidy). In El Salvador, the State will carry on borrowing to pay public pensions, according to a study by the Financial System Commission (SSF). In Greece, the governor of the Central Bank sounded the alarm regarding the cost of social security and warned that the margins are “extremely narrow” for pensions to continue to be paid out of the state budget. Finally, in Paraguay, the OECD has pointed out the urgency of reforms to the PAYGO system, such as: (i) incorporating self-employed workers to improve coverage; (ii) rethinking the parameters of the PAYGO system to make it financially sustainable.

• In Colombia, the Minister of Labor fixed four immutable points in the pension reform to be submitted to congress in December this year: (i) the retirement age will not be increased; (ii) acquired rights will be respected; (iii) ancillary pensions will be respected; and (iv) the subsidies currently applied to the highest pensions must be applied to the lowest pensions.

• In Spain, the Central Bank has called for the implementation of the pension reform before the “average voter” ages more. The Bank argues that the 2011 and 2013 reforms curbed public pension expenditure increases, but that the implementation of the “sustainability factor” has been delayed and if nothing is done, public pension expenditure could increase by as much as 7% of GDP. The Bank also proposes studying innovative solutions for increasing pensions, such as reverse mortgage.

• In Mexico, the Investment Regime has been modified to transition from a Multifunds to a Target Date Funds system, being the first Latin American country to do so. The purpose of the amendments to the investment regime is, among others, to encourage the design of a long-term investment strategy by the Fund Managers that adapts to the evolution of the risk-return profile of workers during their working lives.

• In Peru, Congress finally approved the Special Early Retirement Regime (REJA) and modified Regular Early Retirement (JAO), limiting access in both cases (thus avoiding abuse under the 95.5% Law).

To review the report, please download it at this link.