Background

Pension systems face numerous challenges in the face of ongoing transformations. These challenges include high levels of informal employment, a rapid demographic transition (including low birth rates and rapid population ageing), the climate crisis and technological transformations. These phenomena have direct repercussions on the labour market and, consequently, on the contributory base and the sustainability of pension systems in the region, all whilst the technological transformations open opportunities for improving the management of pension systems.

In this framework, non-contributory pension systems have become key tools for eradicating poverty in old age in these countries by introducing and reaching for universal coverage and constitute key milestones in the realm of social protection systems in the last two decades in the region. However, the levels of coverage and the sufficiency of entitlements differ significantly between countries, and challenges remain in terms of coordination with contributory pension systems, their financial sustainability and their implementation, given the shortcomings of social current social information systems.

According to estimates by Arenas de Mesa, Espíndola and Vila (2024)1, it is feasible to move towards the eradication of poverty in the region by realizing adjustments to the coverage and the sufficiency of non-contributory pension systems, all with relatively limited levels of investment needed. For example, with information obtained through household surveys in 2021, it was found that granting non-contributory pensions equivalent to the poverty line, covering between 40% and 60% of people aged 65 and over by 2035, would involve a total expenditure of 1.1% of GDP in that year (0.7 percentage points more than the expenditure on non-contributory old-age pensions as of 2021) and 1.5% of GDP (1.1 percentage points more than expenditure in 2021), respectively. These results indicate that the eradication of poverty in old age is an achievable and financially sustainable goal within the framework of a strengthening strategy of social protection systems.

Various options are currently being analysed for expanding non-contributory pension systems in countries in the region with financial sustainability, thereby moving forward in eradicating poverty in old age. This analysis is part of the dialogue promoted by the Working Group on Sustainable Pension Systems of the Regional Conference on Social Development in Latin America and the Caribbean and will be incorporated into a document with regional recommendations prepared as part of the activities of the ECLAC-BMZ/giz Project “Productive, Ecological and Socially Just Economic Transformation”.

Objectives of the panel

Within the framework of the VI Regional Seminar on Social Development, and as part of the activities of the Working Group on Sustainable Pension Systems of the Regional Conference on Social Development in Latin America and the Caribbean and the ECLAC-BMZ/giz project “Productive, ecological and socially just economic transformation”, this side event seeks to contribute to the reflection on options for strengthening the design of non-contributory pension systems in the region with the objective of eradicating poverty in old age. The aim is to promote active dialogue between participants, to exchange views on national experiences and to identify common challenges and evidence-based solutions. To this end, several proposals currently under development will be presented, and a space will be provided for high-level comments from representatives of countries in the region.

Methodology

After the presentation of the results of ongoing analyses on ways to strengthen the design of non-contributory pension systems for poverty eradication, there will be a round of comments from high-level representatives of countries in the region. These comments will focus on the options identified in national experiences to strengthen non-contributory pension systems and address the growing demands on pension systems in the face of rapid population ageing. Special attention will be given to the integration of digital social protection as an opportunity to strengthen the management of systems and to address these challenges. This will be followed by a space for comments and questions.
 

References

Arenas de Mesa, A., Espíndola, E., & Vila, J. (2024). “Financial sustainability for the expansion of non-contributory pension systems and the eradication of old-age poverty.” In A. Arenas de Mesa and C. Robles (eds.), Non-contributory pension systems in Latin America and the Caribbean: towards solidarity with sustainability, ECLAC Books, No. 164 (LC/PUB.2024/6-P/-*), Santiago, Economic Commission for Latin America and the Caribbean
(ECLAC), 2024.