Throughout her life, Blanca Guido worked many jobs – child care provider, secretary, hotel employee – but since she never made significant contributions to a pension system, she had to work until age 70.
When she finally decided it was time to retire, she filed some paperwork with the Argentinian government agency to receive a pension equivalent to the amount of money she contributed. However, if it were not for financial support from her daughter, she would have difficulty making it to the end of the month.
Does this story sound familiar?
While Blanca’s situation serves as an example of the improvements in Latin American pension systems, it also reflects a troubling reality: of the 50 million older adults in the region, some 40% do not have the right to a pension because they have not made contributions throughout their working life.
A quick calculation reveals that in Latin America today, there are approximately 290 million people of working age. Fifty-five percent of them, in other words, 160 million, do not contribute to any pension system.
Apart from their statistical interest, these data suggest that many Latin Americans no longer receive income when they reach retirement age. In many cases, this forces them to keep working beyond a reasonable age, spend their savings or depend on the generosity of their families.
But relying on families has an economic impact, particularly if they have limited resources, because they must allocate some of their income to the care of their elderly members.
“One solution to this problem would be to improve labor market formality to ensure that workers make regular contributions. At any rate, to resolve the situation of many older adults requires moving beyond traditional contributory pensions,” says Rafael Rofman, World Bank pension expert and author of the study Beyond contributory pensions in Latin America and the Caribbean.
The expert observes that thanks to economic growth over the past decade, formal employment increased, and with it, more people entered contributory systems. Currently, 45% of workers contribute to a pension system, as compared with 35% 15 years ago.
These winds of global economic change convinced Latin American governments of the need to establish reforms in pension systems. As a result, approximately 11 million adults over age 65 who had been excluded from such systems were able to receive benefits.