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18 April, 2018

The Spanish PAYGO pension system is no longer viable: Rafael Puyol

Spanish demographics expert analyzes the future of pensions in Latin Americ

The Spanish PAYGO pension system is no longer viable: Rafael Puyol

  • He warned of uncertainty in the payment of future “baby boomer” pensions in Spain.
  • He revealed that there are ever-fewer women of childbearing age worldwide and smaller family nuclei, warning that this trend should not be allowed to continue.

Cartagena, April 12 2018. In the afternoon session of the FIAP-Asofondos Congress focusing on the analysis of demographic trends and their impact on pensions, the Spanish expert Rafael Puyol pointed out the major demographic challenges facing the PAYGO pension systems, like the public system operating in Colombia. According to Puyol, there are two major hazards: low fertility rates and population aging, both of which have caused a crisis in the Spanish PAYGO system

“It is very disturbing that the fertility rate is below 1.5 children per woman. In Spain, for example, this rate is already 1.3 children per woman, while in Colombia it is 2.0.” According to the expert, this phenomenon negatively affects the labor market, since there will be fewer workers and therefore fewer contributions to social security, including pension savings. “It will not suffice to reduce unemployment or improve the informal economy or productivity,” since he believes that the most robust solution is to increase the birth rate and open the doors to immigration, “although this does not reverse all the aforementioned problems.”

The experts also warned that Latin America is going the same way as Europe, i.e. lower birth rates, aging population and PAYGO pension systems without sufficient resources to protect the population. “The difference that I see compared to Europe is that Latin America would take less time to age.”

Puyol ended his speech with the following hypothesis: “With our current demography, it is impossible to maintain or even recover the PAYGO systems, because you cannot seek to resolve a problem with another problem.”

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