Social pensions in Latin America

Recent Developments in the Role and Design of Social Protection Programmes.

A Policy Dialogue, Expert Workshop and South-South Learning Event

International Policy Centre for Inclusive Growth (IPC-IG)

Brasilia, Brazil, 3-5 December, 2012

Fabio Bertranou International Labour Office

bertranou@ilo.org

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What are social pensions?

• Social pensions are part of the social assistance non-contributory social protection system

• Social pensions have gained relevance in social protection systems in Latin America

• Social pensions main goal is to provide income security to the elderly poverty alleviation function

• Non-contributory pensions also provide income security for those with invalidities

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Why social pensions?

• Social pensions needed to fill the coverage gap resulting from low coverage of contributory pension schemes

• They are important, from an ILO perspective, because they are critical to fulfill the goal of materializing a social protection floor

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Why non-contributory benefits are relevant for Latin America?

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Americas | Population (15-64) contributing to social security-pensions (%)

Source: ILO/Social Security Department/Social Security Inquiry. To be published in World Social Security Report 2012/2013, in progress.

About 1 out of 4 adults contribute to social security – pensions…..

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Source: ILO/Social Security Department/Social Security Inquiry. To be published in World Social Security Report 2012/2013, in progress.

… however, 1 out of 2 elderly get a pension benefit

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Rofman and Oliveri (2012) Pension Coverage in Latin America: Trends and Determinants. World Bank

The contributory / non-contributory mix

What explains the differences in the old age benefits coverage gap?

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… the capacity to “fuel” the social protection system with tax revenues

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0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0

Guatemala

República Dominicana

El Salvador

Venezuela

Perú

Colombia

México

Chile

Latin American average (n/w)

Costa Rica

Uruguay

Argentina

Brasil

OECD (n/w)

% GDP

Tax revenues as % GDP 2009

Policy design issues

• Beyond the issues of eligibility rules, targeting mechanism, benefit level, administration, financing and fiscal costs…

• ….the most challenging policy issue is how non-contributory pensions should interact with contributory pensions as the economy grows and social protection systems develop…

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How to design “semi-contributory” or “quasi-contributory” pensions

If we consider the polar cases: – Persons with no contributions in their entire labor

trajectories

– Persons with complete contribution densities

… the non-polar cases constitute a substantial part of the labor force…

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Contribution density

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Chile Argentina

How countries have dealt with this challenge….

Brazil: flexible requirements within the contributory scheme (e.g. rural workers) + non-contributory pensions (BPC)

Argentina: moratorium for access to contributory benefit + non-contributory pensions (PNC asistenciales)

Chile: basic and solidarity pension (integration of non-contributory, semi-contributory and contributory pensions)

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2008 pension reform in Chile: Integration of contributory, semi-contributory and non-

contributory schemes

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Thank you!

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