Progress of the Pension Systems No. 6 / October-November 2017
Crisis in the PAYGO systems worldwide. In Colombia, the highly regressive nature of the public PAYGO system is disturbing, since 75% of government pension expenditure is paid to 40% of the richest pensioners in the country. In Spain, pension cuts, in real terms, are not sufficient for balancing Social Security accounts, which will be almost half the 2018 public deficit, and 1.4% of GDP. Hence, different international agencies have called for ongoing reforms of the pension system and promoting private savings. In Ukraine, a series of changes were approved for providing greater financial sustainability to the public PAYGO system: an increase in the minimum number of years of contributions required for accessing a partial pension, modification of the formula for calculating benefits, and automatic pension indexing.
The reform of the pension system came into effect in El Salvador. The reform introduces a series of measures for the country’s pension system, such as increasing the contribution rate from 13 to 15%, the introduction of longevity insurance, automatic adjustment of the retirement age in accordance with life expectancy, and the promotion of voluntary pension saving.
Investment in alternative assets authorized in Chile. As of November, the pension funds will be able to invest in alternative assets such as instruments for investing in private capital assets, private debt, infrastructure works and the non-residential real estate sector.
The Central Bank of Uruguay modifies the rules for calculating life annuities. The agency updated the mortality tables and committed to their regular updating. It also modified the technical interest rate used for calculating life annuities. These measures seek to attract private insurers to the country’s life annuities market.
