Costa Rica facing potential pension crisis
Costa Rica's social security system (CCSS) is going to begin to run out of funds in 2021, fully exhausting its reserves roughly a decade later, according to an actuarial study of its retirement fund (FRE).
The study, conducted by pension regulator Supen, examined FRE data through September 2016 and showed that system payouts are already outpacing contributions by 619bn colones (US$1.085bn) per year.
According to a report from Costa Rican daily La Nación, the FRE currently supports 14,523 pensioners with 53,383 active members who have been guaranteed pensions at retirement.
While the emerging pension crisis is relatively young in comparison to many nations in the region, the study underscores that Costa Rica too must begin addressing the problem. Procrastination on the same issue has thrown other governments into fiscal crisis, including that of nearby El Salvador this year.
Currently, public funds contribute the equivalent of 2% of the total payroll of workers under the plan, where individual workers currently make zero contribution from their own paychecks.
The FRE's expenses, mostly pension payouts, are estimated to reach 24.12bn colones in 2017, a figure expected to rise at an accelerated rate with the aging population. Consequently, the analysis showed that payments to the fund must climb to 5.9% to remain sustainable.
The FRE does however not yet see the need to begin asking for individual contributions.
According to FRE board president Gustavo Picado, interviewed by La Nación, the proposal to achieve the financial and actuarial balance of the FRE, does not imply any increase in contributions from the workers or from the CCSS (headquarters pictured), rather it merely needs "a redistribution of financial resources"
"According to the actuarial estimates developed during this process, the combination of the redistribution of contributions and a change in the formula for calculating the supplementary pension benefit allows a financial and actuarial balance to be achieved with an average premium lower than that indicated by the Supen in its report," said Picado.
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