Population ageing and pension systems in Latin America

This paper will examine the effects of population ageing on the medium- and long-term evolution of pension systems in Latin America and the Caribbean. It is organized into six sections. After the introductory section, section II provides information on ageing and pension system trends in the Latin American countries, with some references to the international context. Section III gives indicators, data and methods of analysis, and examines the effects of ageing population structures and rising life expectancy on pension system variables: spending on pensions, the financial position, pension liabilities and the implicit rate of return; it also includes a critical analysis of the criteria that are generally used to evaluate the sustainability of unfunded systems. Next, section IV provides a more systematic introduction to the concept of and indicators used for implicit pension debt, gives estimates of the scale of the pension liabilities that have to be made explicit when the switch to a funded system takes place and analyses the effects of the age structure and adult mortality rates in the Latin American countries. Section V looks briefly at the fiscal transition costs that have to be coped with when this type of reform is applied and, lastly, section VI contains a summary and conclusions.