Reflecting on the future of pension systems

Abstract

The crisis that is dragging the pandemic of COVID-19, will put back in the public debate how to approach the financing of the inescapable increase in indebtedness that the economic policy that it will face will bring. The return to old recipes of austerity, if they are applicable, will bring with them budget cuts that can affect, as has happened in the past post-crisis years (2013-2017, the provision of resources to finance social protection policies.

In this hypothetical context, it would not be surprising that from different interest groups and from conservative political orientations, the expansion of capitalization pension systems (privately managed, possibly) is encouraged, replacing the current, public, pay-as-you-go, total or partially. To a large extent, the philosophy of a good part of the reforms that have been implemented in most of the developed (and emerging) countries in the last decades, went in that direction. Beyond addressing the financial problems faced by these pay-as-you-go systems, justifications for multiple reforms in the very same ones, it is worth bearing in mind the fundamental role that these social protection instruments have been developing in terms of social cohesion and, by extension, of economic and political stability.

There are alternatives, in the search for financial sustainability, without questioning the satisfactory effect of current models on social cohesion. In this work the possible effects of the models of alternative pension systems referred to are advocated, to conclude on the need to look for resources that financially balance the pay-as-you-go systems, resorting to formulas that contribute to increase the equity levels redistributive achieved.