January 2017

It is increasingly evident that public pensions are going to be hard to sustain in the future: the ratio of workers to pensioners is close to a historical low. The crisis has taken nearly two million contributors out of the system, and adds to another variable that proves a greater challenge and is even more difficult to reverse: demographics.

In 1971, only 9.7% of the population was aged over 65. Today, that number has grown to over 18.8% of
the population, and will grow to 38.7% by 2060. By then, there will hardly be 1.27 people of working age for every over-65 year old – one third of today’s rate.

This situation calls for four possible solutions: first, a progressive pushing back of retirement age; second, a substantial reduction of pensions themselves; third, a drastic increase in social security contributions; or fourth, a progressive adoption of an alternative system: one which capitalizes retirement pensions.