MIL-OSI Banking: Trinidad and Tobago with the highest pension coverage

1

Source: CAF Development Bank of Latin America

Aging, increasing informality and new technologies are the most challenging issues affecting the pension and healthcare systems in Latin America and Caribbean Countries, according to the 2020 edition of the Report on Economy and Development (RED) published by CAF.

The RED 2020 addresses challenges faced by social protection systems and public policies in the twenty-first century, focusing on pensions and the provision of health and long-term care services for the elderly. The study aims to provide a comprehensive and in-depth review of both systems, considering the interactions between the demographic structure, the labour market and other factors that determine their financial equilibrium and sustainability. It also offers tools for building quality and financially sustainable social protection services for the elderly. 

The Report shows that Trinidad and Tobago’s population over 65 represents 12% of the total, whereas in the Latin America region the average is 8%. Projections indicate that by the year 2050 this population is expected to approximately double, specifically the digits for +65 population will grow up to 23% in Trinidad and Tobago and 18% in Latin America during that same year.

The Honourable Colm Imbert, Minister of Finance of Trinidad and Tobago expressed during his key-note speech: “The global pandemic has accelerated many plans to utilize technology in a more meaningful manner. I am also of the firm belief that this crisis also provides us with the opportunity not only to deploy technology in the health and pensions sector, but also to re-examine these systems. We have a chance to change the products offered or to offer new products that will reach more people. We need to change the traditional structures and the legislation frameworks to facilitate this active evolution, while at all times ensuring that the most vulnerable in our society are protected. We have the opportunity to implement innovative solutions to not only enhance these systems today, but to ensure they are sustainable and fit for purpose for future generations to come”.

“In developed countries like France and Sweden, it took 115 and 85 years, respectively, to double their over 65 years population, in our region, it will take around 30 years. Of course, this is a good sign, because it reflects the improvement in the health conditions of the population, but at the same time it is a reality with huge implications on the sustainability of pensions and health care systems in our countries”, said Fernando Álvarez, Senior Research Economist of CAF, during the event.

Alvarez also pointed out that Trinidad and Tobago registered a public expenditure in its pension system close to   6.7 % of GDP and also the highest pension coverage system of the region, followed by Bolivia (2nd place) and Argentina (3rd place). The Report explains that elderly coverage and expenditure per beneficiary determine  the system expenditure, whereas the system revenue is determined by the share of contributors and the rate of contribution. The dilemma faced by countries is how to address the lack of balance between these factors.

Additionally, the 2020 Report on Economy and Development highlights that an informal workforce reduces the share of contributors by a magnitude similar to 40 years of aging, hinders the design of contributory social protection programs, and restricts access to contributory social protection benefits. In Latin America, most of the countries have an excessive level of informality compared to the rest of the world, which impacts on pensions systems, as many workers contribute only for a short time.

Pablo Sanguinetti, Vice-President of Knowledge of CAF, added during his intervention: “An important factor is technology, which can affect markets increasing the number of informal workers in the labour force, weakening even more the pension systems of the country”.

Non-contributory persons and universal coverage represent another challenge in public policy. Trinidad and Tobago has attained 96.7% of universal coverage and a 69% of its system is based on the non-contributory, representing 3,9% of GDP. Most of the countries in Latin America encounter more issues regarding the universal coverage of the pension system, which on average represents 76% of the elderly population.

Gianpiero Leoncini, Representative in Trinidad and Tobago of CAF added during his closing remarks, “Many challenges outlined today will deeply impact public policies in the coming years. From CAF’s perspective, we belief it is our role not only to provide financing or technical assistance, but also bring ideas to the table, share best practices, and encourage a dialogue as happened today, in order to try to generate a wide consensus with a long-term vision about our public policies”.

The virtual meeting counted on the participation of the Honourable Colm Imbert, Minister of Finance of Trinidad and Tobago as key-note speaker, followed by the Report Presentation by Fernando Alvarez, Senior Research Economist of CAF. The discussion panel was moderated by Reinier Schliesser, Principal Economist of CAF, and gathered the insights from Ignacio Apella, Pensions Expert of the World Bank, Douglas Camacho, Deputy Chairman of the National Insurance Board, Maria Daniel, Partner for Strategy and Transactions of Ernst & Young, and Jennifer Rouse, Gerontologist of the University of the West Indies.

MIL OSI Global Banks