Crisis in public pay-as-you-go pension systems: In Saudi Arabia, in July 2024 the country announced a pension reform that addresses critical issues of its pay-as-you-go pension system, such as the retirement age (gradual increase from 58 to 65 years), the time required to qualify for a partial pension (from 25 to 30 years), contribution rates (progressive increase from 9% to 11%), and maternity leave (funded through social security rather than through individual employers). In Ecuador, the IESS pension reform process is in a critical phase, with pension increases already in place and proposals for changes that seek to improve the sustainability of the system (due to be presented by the end of 2024), but which have also generated strong opposition among retirees. In Spain, the government and social partners have agreed on more incentives if retirement is delayed and to facilitate partial retirement, in order to address the huge gap between income and expenditure of the pay-as-you-go pension system.
Advances in responsible investment: The United Nations Environment Program’s Finance Initiative (UNEP FI), the Climate Bonds Initiative (CBI), and the Principles for Responsible Investment (PRI) Committees have announced that they will work together to address global interoperability and the implementation of sustainable finance taxonomies and other frameworks. Furthermore, the IDB published a practical guide for disseminating experiences and best practices in the issuing of sustainable financial instruments (thematic bonds, bonds linked to sustainability, among others). Finally, an HPL article points out that the development and implementation of harmonized taxonomies is the cornerstone of sustainable finance.
Advances in financial/pension education: In Mexico, in July 2024, Amafore and the Communication Council launched the “It’s your money, it’s your future” campaign, which seeks to promote knowledge of individualized savings accounts and Afores among workers, while highlighting the significant contribution of companies in this long-term savings process.
Advances in labor formality: The ILO presented its FORLAC 2.0 Strategy to address the challenge of informality in the Latin America and Caribbean region. FORLAC 2.0’s short-term goals are to contribute to improving policies and institutions that impact the transition to a formal economy, hoping to contribute to progress in the mid and long term by increasing productivity and social protection coverage, among other aspects.
Argentina: The Government is working on a draft pension reform that proposes standardizing the retirement age for men and women at 65, while considering the possibility of privatizing the contribution fund.
Chile: The government and the opposition signed a memorandum of understanding regarding the joint processing of the pension reform bill of law in the Senate, by no later than January 2025. Instituto Libertad y Desarrollo (LyD), is concerned that the memorandum of understanding will validate the creation of a “social security,” which in practice merely entails reintroducing PAYGO components to the pension system, whereas they can be financed with general taxes, implementing measures that would enable greater collection, without affecting investment and growth.
China: The country is pushing for an increase in the retirement age (currently between 50 and 60 years of age) to mitigate the “structural unemployment” of an aging country, based on the principles of free will and flexibility.
Costa Rica: The Association of Pension Operators (ACOP) has called for more time to implement the generational funds (agreed for March 2025). According to Danilo Ugalde, the Chairman of ACOP, international experience has shown that the implementation of generational funds usually takes more than three years.
Some relevant studies:
A CLAPES UC Study shows that in the last 43 years, the individually funded pension system in Chile has accounted for one third of the growth in local investment, 7% of the real cumulative variation in GDP, and 2.6% of growth in the employed population.
The OECD published a report calling for the establishment of a core set of social protection benefits available to all formal or informal sector workers.
ECLAC published a book that emphasizes the need to collectively streamline the design of non-contributory systems to avoid distortions or disincentives in contributory systems.
