OECD urges Latin America to broaden pension coverage

20 Apr 15

Just over four in ten workers in Latin America and the Caribbean are contributing to a retirement plan, the Organisation for Economic Co-operation and Development has said.

In a report, issued today, the OECD said the low levels of contributions to pension schemes reflected income, educational, and occupational attainment. The report, which was co-published by the Inter-American Development Bank and the World Bank, profiled the 26 LAC countries’ national pension systems.

The OECD said, by 2050 more than 80 million people in the region will not be in receipt of a retirement package unless pension systems are reformed and efforts are made to increase formal sector employment, including improving access to quality education.

It also said that an ageing population would lead to higher spending on pensions in the LAC region, while the number of workers in the informal sector, who do not make contributions, put the adequacy of pension benefits at risk.

OECD Secretary-General Angel Gurría, speaking at the launch of the report, pointed out that the creation of formal jobs, especially for women, is key to building future pension entitlements.

‘Too many people in the region are still excluded from the pension systems. Further reforms are needed to broaden pension coverage to ensure an adequate income at retirement,’ he said.

Currently, only 20% to 40% of the middle-income workers contribute to pension schemes, making them particularly vulnerable to old-age poverty risks, the report warned.

IDB President Luis Alberto Moreno added: ‘We must act now to ensure the future of pensions in the region.

‘Right now we are enjoying a demographic dividend that cannot be missed. If we get more people to contribute to our pension systems, and if we adjust the systems to rising life expectancy, we will be able to provide adequate coverage to future generations.’

  • Judith Ugwumadu

    Judith writes about public finance, public services and economics across Public Finance International and Public Finance. She previously undertook reporting stints at Financial Adviser, Global Security Finance and The Sunday Express.

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