Crises in public PAYGO systems: In Costa Rica, new and more restrictive retirement rules came into effect in the PAYGO system on January 12, 2024, to ensure its sustainability for at least three decades (among the approved changes is the elimination of early retirement for men as of 62 years of age, setting the official retirement age at 65, and raising the early retirement age for women from 60 to 63; as well as the modification of the pension calculation formula, making it less generous (this change implies a reduction of between 8% to 10% in pension amounts). In Cuba, the collapse of Cuban State finances and the accelerated aging of the population led the government to reduce the highest pensions by modifying the method for calculating them (the rule came into effect on January 4, 2024). In United Arab Emirates, in November 2023, the government announced a new law reforming its PAYGO social insurance program, which, among other things, increases contributions (from 5% to 11% for public sector workers and from 12.5% to 15% for private sector employers), the official minimum retirement age (from 50 to 55), and the minimum number of years of contributions to qualify for a pension, from 20 to 30.
Brazil: A new law promulgated in January 2024, allows participants in supplementary pension plans to opt for the tax regime when obtaining the benefit, or when making the first withdrawal (they previously had to decide when enrolling in the plan). Experts say that the new standard is a milestone and encourages pension savings.
Chile: The Chamber of Deputies approved the idea of legislating on pensions but rejected the core of the government’s proposed bill of law (3% to individual accounts and 3% to an intergenerational social security PAYGO system) and the rules that entail a nationalization of the pension industry. The bill is due to be discussed in March in the Senate, where the government does not have a majority.
Switzerland: The Swiss will go to the polls on March 3, 2024, to decide whether to gradually increase the retirement age for men and women to 66 in 2033 (in a second phase, the retirement age would be increased by 80% of the increase in life expectancy). This will guarantee the financing of PAYGO system pensions until at least 2033.
Relevant reports:
David Bravo’s study concludes that the net replacement rates associated with individually funded pensions in Chile are close to international standards (they are more than 80% for male pensioners prior to pension fund withdrawals and are close to 60% for female pensioners).
In light of population aging, a World Economic Forum study, proposes several principles for ensuring the financial resilience of all generations, including financial resilience in key life events; universal access to financial education, prioritizing healthy aging as a foundation for the longevity economy; and adapting jobs and developing skills for a multigenerational workforce.
The OECD published a study on the vicious circle of informal employment and low-paying work. It recommends non-contributory social protection schemes and subsidies for participation in contributory schemes for low-income and low-skill informal workers, among other measures. Policies that encourage the formalization of high-income informal workers are required.
The OECD published its 2023 International Survey on Adult Financial Education, which shows that, on average, only 34% of adults in all participating countries achieved the minimum target score in financial education (defined as at least 70 out of 100 points).
