Pension policy and the State

Abstract

Over the 20th century, the state has acquired a prominent role in the administration of old-age pensions in Latin America, expanding legal coverage to the majority of the employed population. However, gaps in effective coverage remained large as a result of the high incidence of informal work. Over the last two decades of the 20th Century, the almost exclusive role of the state in old-age protection was deeply challenged. Starting with Chile in 1981, several countries implemented structural pension reforms that shifted to individual accounts and private pension administration, thus completely reshaping the public-private balance in the pension system. Private schemes were presented as a new and more effective way to manage old-age security and promote economic growth. These schemes also faced shortcomings, including high administrative costs, financial market risks, and problems of coverage, equity, and adequacy. Over the 2000s, as governments with a more progressive policy agenda took office in a context of favorable macroeconomic conditions, the state gained ground in the administration of old-age security. This more active role of the state has strengthened public pensions compared to two or three decades back, with better instruments for basic protection, new systems of administrative registry of contributors and pensioners, and broader coverage of the population across the territory.