Increase in the retirement age, a constant in the pension reforms in Latin America

By: Carlos Ríos / “El País” / GDA*

Few countries in the world escape the need to review their social security system from time to time, and in almost all cases the most controversial point is the increase in the minimum retirement age.

This year we have seen massive protests in France against the pension reform promoted by President Emmanuel Macron, which raises the minimum age from 62 to 64 years from 2030, and brings forward to 2027 the requirement to contribute to 43 years, instead of 42, to collect a full pension. In the midst of popular revolts, strikes and a possible failure in Parliament, Macron appealed to a constitutional power and approved the reform by decree. The matter ended up in the hands of a Constitutional Council, a kind of group of “wise men” who on Friday the 14th decided to validate the key measures of the reform, unleashing an immediate response of rejection in the streets after months of protests.

Experts agree that in the face of greater life expectancy, raising the retirement age is necessary to maintain the proportion of the economically active population despite aging.

This was the recommendation made at the end of March by the chief economist of the World Bank (WB), Indermit Gill. Taking France as an example, Gill recalled that in that country “a 20-year increase in life expectancy has been observed since 1950.” “We must therefore expect people to work longer,” he emphasized. But “there are people who refuse to work even two more years despite this two-decade increase in life expectancy,” Gill added. According to him, this is a sign of the difficulty of accepting a need.

This is one of the arguments of President Luis Lacalle Pou to defend the pension reform in Uruguay – he described it as an “act of national responsibility” – but, like the French reform, it faces strong opposition from the left and from the unions.

The statement of reasons for the project of the Uruguayan government refers to the demographic factor. Remember that in 2017 the Office of Planning and Budget (OPP) published “Demographic Scenarios 2050”, where the population of Uruguay is projected under different hypotheses. The most relevant conclusion of the study is that in all scenarios, the aging process is inevitable due to the decline in fertility and mortality rates.

In Uruguay, the changes projected in the reform will take effect in their entirety in 2043, and will not affect the retirement conditions of those who have already retired or those born before 1973.

The minimum retirement age – today at 60 years – will be 65 years for the majority of workers, with 30 years of contributions. The reform also provides for this calculation to be adjusted to life expectancy in the future, to prevent the system from becoming unbalanced due to an imbalance between assets and liabilities.

According to the calculations of the Uruguayan government, the reform would not curb the deficit of the pension system, but it would allow it to be reduced from 11% to 8% of the Gross Domestic Product (GDP).

Now, how in tune is the Uruguayan pension reform with the reality of social security systems in leading Latin American countries?

Today Uruguay is more or less in the middle of the table between those who have the minimum retirement age of 65 years, and those who have it around 50.

Among the countries with the retirement age at 65 in the case of men, are Costa Rica, Mexico, Peru, Argentina, Brazil, Chile, Cuba and Honduras. Bolivia is the one with the lowest age for men: 55 years. In Colombia, a reform promoted by the government of Gustavo Petro is in process, but which maintains the minimum retirement age at 62 for men and 57 for women.

regional overview

In Argentina, the main system is the Argentine Integrated Pension System (SIPA), which is public and pay-as-you-go. But according to a survey carried out by the Cippec study and research center, there are 177 regimes that have either special funds or special conditions.

In the SIPA system, a minimum age of 60 years is required in the case of women and 65 years in the case of men. In other regimes there are usually lower ages. On average, the retirement age is 63 years.

In Argentina, a reform was approved in February of this year so that people who do not have the years of equal contribution have access to a retirement. Another more or less recent reform (in the government of Mauricio Macri) provided that companies cannot intimidate their employees to leave work and retire until they are 70 years old. Thus, the minimum retirement age was not raised, but a framework was established to encourage delayed retirement.

In Brazil, the pension system is totally public, but just like Argentina, different regimes coexist.

The minimum retirement age in Brazil is 62 years for women, with 15 years of contributions; and 65 years for men with 20 years of contributions. But to reach the maximum retirement value, women need 35 years of contributions and men 40 years.

In 2021, the latest data available, the average retirement age for women was 59 years and that for men was 62 years.

The last pension reform in Brazil is very recent, it was carried out in 2019. The minimum ages were established and the contribution was increased, among other changes.

In the other member of Mercosur, Paraguay, to access retirement through the Social Welfare Institute (IPS), there are three options: 55 years of age and 30 years of contribution; 60 years of age and 25 contributions; and 65 of age and 15 of contribution. Of these three, the one called “60/25″ (60 years of age and 25 years of contribution) is the only mandatory one in which the employer can retire a worker.

Chile has been a pioneer country in the region in the application of the compulsory savings system by individual capitalization. Each month workers deposit a percentage of their income (10%), in a personal account in a pension fund administrator (AFP).

The minimum retirement age in Chile is 60 years in the case of women and 65 years in the case of men. There is no set number of years of contributions as a requirement to retire.

Given the gradual aging of the population in Chile, the last governments and the current one have promoted a series of changes in pension matters to solve the long-term financing needs of the system.

The current Government of Gabriel Boric promotes a reform that increases the amount of the Universal Guaranteed Pension (PGU); A new 6% social security component is created, financed by employers, in which all contributions will be recorded in personal accounts and includes compensation for women. The AFPs are over. There will be new private investment managers and a public alternative.

In punished Venezuela, the system is public. The Venezuelan Social Security Institute (IVSS) has existed since 1946. Although the private sector is not prevented from maintaining its own pension systems, it is not regulated, and the cases in which they are applied are not in the public domain.

Regarding the minimum retirement ages, in Venezuela for an ordinary retirement it is 55 years for women and 60 years for men, with 25 years of service in both cases.

Outside of social security in the traditional sense, the government of Hugo Chávez established in December 2011 a parallel mechanism called “Gran Misión En Amor Mayor”, with which an amount similar to that of pensions is granted to older adults who do not they contributed, so they do not have access to IVSS benefits.

Currently, these allocations are maintained and delivered through a controversial centralized government digital system called “Patria”. The system has contributed to inflation, according to multiple complaints from economists and workers, who claim that the Executive uses the Central Bank as its petty cash, violating the Constitution that establishes the autonomy of the national monetary authority.

Given the partisan nature of the so-called “Great Missions”, the survival of the “En Amor Mayor” plan is apparently contingent on the permanence in the government of the United Socialist Party of Venezuela (PSUV).

In Venezuela the average retirement age is between 55 and 60 years. However, given the economic and social crisis, which has worsened since 2013, there are retirees who have returned to work, in many cases in the informal economy.

The system in the Dominican Republic is mixed, and the minimum retirement age is 60 years with 30 years of contributions. The system was reformed in 2001, but there are already some proposals for changes, including extending the retirement age to 63 or 65, and the years of contributions.

In Puerto Rico they are governed by the United States system. The minimum age to apply for federal Social Security benefits ranges from 62 to 67 years. However, for people born after 1960, the minimum age to benefit from Social Security is 67 years.

In Mexico, the social security system is public and falls mainly to the Mexican Social Security Institute (IMSS) and the Social Security and Services Institute for State Workers (ISSSTE), with special regimes such as Petróleos Mexicanos or the Armed Forces.

In the case of the IMSS, the minimum retirement age is 60 years for those born before July 1977, and between 60 and 65 for those born after that year. In the case of ISSSTE, the minimum age is 53 for men and 51 for women, with 30 and 28 years of contributions respectively. 56% retire between 60 and 69 years of age.

In El Salvador, two pension systems coexist: the pay-as-you-go system and the individual capitalization system. The retirement age is 60 years for men and 55 years for women, with a minimum of 25 years of contributions.

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*The Grupo de Diarios América (GDA), to which “El Comercio” belongs, is a leading media network founded in 1991, which promotes democratic values, the independent press and freedom of expression in Latin America through journalism of quality for our audiences.

Source: Elcomercio

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I am Jack Morton and I work in 24 News Recorder. I mostly cover world news and I have also authored 24 news recorder. I find this work highly interesting and it allows me to keep up with current events happening around the world.