Latin America: Innovative Reforms Expand Pension Access by 11 Million People, Help Ageing Population from Falling Into Poverty

Washington, March 14- Through innovative pension systems reforms over the last decade, Latin America expanded pension access by 11 million previously excluded people over 65, according to a new World Bank publication launched at the Inter-American Dialogue.

During the decades of 1980 and 1990 most pension systems in Latin America were revamped to improve their financial sustainability, but in recent years efforts have been aimed at achieving greater inclusion from various programs such as expansion of non-contributory pension or flexible entry requirements to traditional contributory pension schemes.

Beyond Contributory Pensions: Fourteen Experiences in Latin America (Más allá de las Pensiones Contributivas: Catorce experiencias en América Latina) — notes that recent reforms of pension systems adopted in 14 Latin American countries in the last decade have helped reduce the proportion of the population over 65 with no access to benefits by almost 33%, a change that represent the most dramatic coverage improvement in decades.

The report also focuses on how LAC countries are addressing the urgent need to prevent its rapidly ageing population from falling into poverty. In 1950, life expectancy in the region was 52 years; it reached 74 in 2010 and is expected to exceed 85 by 2100.

Towards shared prosperity

"There is no single recipe to protect seniors that are excluded from traditional pension systems. Each country has different coverage levels, fiscal constraints and face challenges and characteristics that require flexible policies," says Rafael Rofman, World Bank Lead Social Protection Specialist for Latin America and co-author of the report. "However, what we can say is that despite these differences, all countries in the region are on a path of inclusion," he adds.

Currently there are various strategies to achieve this goal between the countries of the region, which could be classified into three groups:

- Universal Access: Countries like Bolivia and Trinidad and Tobago, which granted pension benefits to all seniors, regardless of their previous benefits, which will not be taken away.

- Inclusion of Excluded: The new inclusion programs in Argentina, Brazil, Chile, Panama and Uruguay aim at closing the coverage gap, granting pension benefits to those who had none in the past.

- Focus on the Vulnerable: Countries such as Colombia, Costa Rica, Ecuador, El Salvador, Mexico, Paraguay and Peru, are providing social pensions as part of their poverty reduction and social assistance strategies, targeting benefits to the most vulnerable, under a model that replicates the approach to poverty among families with young children.

The challenges ahead

"In Latin America there is a paradigm shift towards [using pensions as a tool for] inclusion and poverty reduction, the challenge now is to consolidate this shift and make it sustainable over the coming decades," says Ignacio Apella, World Bank Social Protection Specialist and co-author of the study.

The reforms studied show a significant improvement in the coverage of the elderly in Latin America. The challenges ahead seem to be around consolidating these changes in legal and institutional terms, ensure fiscal sustainability as well as political and social consensus around them, and give continuity to the advances in terms of inclusion achieved in recent years.

Beyond the Contributory Pension describes the main issues faced by countries in the region to increase the coverage of pension systems beyond the population of formal workers.