Pension systems have been designed and have evolved in accordance with the economic, social and political conditions of each country. However, all pension systems face similar challenges that test their ability to guarantee the effective protection of people in old age, without generating strong fiscal pressures. The transformation of work resulting from the digitalization of society, low economic growth, population aging and increased life expectancy, are some of the challenges facing pension systems worldwide. In recent years, the negative effects of these phenomena have been felt, especially in PAYGO models, and have begun to affect the fundamental pillars of all pension systems: sustainability, coverage and the adequacy of pensions.

In this context, saving and individual funding are essential for a pension system to function properly and guarantee the economic security of current and future workers in old age, since they enable the efficient articulation of these objectives. This document analyzes the advantages of savings-based pension systems compared to PAYGO systems. It particularly studies aspects of pension systems related to their fiscal impact and sustainability, internal profitability and workers’ risk exposure. It also studies the effects of savings and individually funded pension systems on income distribution and economic growth.

To review the document, please download it here (only the Spanish version available for now).