Last month our Chief of Global Strategy and Operations Manuel Garcia Huitron was interviewed by David Tuesta from pinBox Solutions Latin America - Innovando en Pensiones.
Manuel focused on the pension challenges in the Latin American region. Although Chile is usually thought of as representative of the region, he said there is a lot of heterogeneity in pension design. In his view, pensions in Latin America are either low (especially in low coverage individual DC schemes) or unsustainable (especially in high coverage PAYG-DB schemes), leading to growing fiscal and social grievances in the region.
Manuel also addressed the pensions gender gap in Latin America. On average, the gap is 20% in the region (see this publication), which is slightly lower than the 26% average gap reported by the OECD for its members (see this publication).
In the last part of the interview, Manuel talks about the main obstacles to improving pension systems in Latin America. These obstacles include:
- Low and irregular contributions due to the informality of the labor market.
- Accelerated aging (both a declining birth rate and increasing life expectancy in retirement)
- Lower expected returns in the future
- Vulnerability to so-called conversion or interest rate risk in retirement
- Lack of lifetime income solutions
Retirement plan design is important. For instance, plan design can amplify, neutralize or reduce gender gaps. We founded Nuovalo as a public benefit company because we care about social issues like the gender gap in retirement savings. We are committed to developing more equitable, efficient, and truly sustainable retirement solutions.
If you want to know more, please watch the video below.