Still Working, No Longer Contributing: The Pension Gap for Latin America’s Over-50s

Latin Americans above the age of 50 largely continue working, but many shift to informal work. Low social security coverage and limited opportunities to save in informal work not only deepen economic vulnerabilities for these workers, but also threatens the sustainability of pension systems.

A recent study from the International Federation of Pension Fund Administrators (FIAP) shows that while labour force participation for those aged 50-75 years declines between 5 and 15 percentage points, access to formal employment falls between 15 and 30 percentage points.

From that age until 75, labour force participation declines by between 5% and 15%, according to a report by the International Federation of Pension Fund Administrators (FIAP).

According to data from the International Labour Organization (ILO), 51.7% of employment in Latin America is informal, affecting approximately 92 million people.

The FIAP study, entitled “From Informal Longevity to Effective Contributions”, covered 8 countries (Chile, Colombia, Costa Rica, El Salvador, Mexico, Peru, Dominican Republic, Uruguay) in Latin America. It identified challenges on both the demand and supply sides of the labour market.

“On the supply side, relatively low statutory retirement ages and the availability of non-contributory pensions from the age of 60 to 65 may encourage early labour market exits.”

In addition, some regulations may discourage people from continuing to work and make pension contributions after retirement, for example when a pension is reduced or lost if the person remains in employment.

“On the demand side, age discrimination, employers’ perception of higher costs associated with workers aged 50 and over, and skills obsolescence hinder the hiring and retention of this group,” the report warns.

Informal work and women over 50 in Latin America

These barriers to labour market participation in formal employment have a particularly strong impact on women. They tend to have fewer years of pension contributions than men because they spend more time in informal employment and devote more hours to caring for children and relatives and to unpaid household work.

As a result, women are more likely to reach old age with inadequate pensions or insufficient income.

The likelihood of receiving a contributory pension also varies significantly across the region. Countries such as Brazil, Uruguay and Chile have rates above 80%, while El Salvador and the Dominican Republic have rates below 20%.

Informal employment means lower social security coverage and less accumulation of pension savings. As a result, economic vulnerabilities become more severe, particularly during retirement.

This year, WageIndicator launched the WUNDERWORK project for European countries, which aims to understand and find solutions for undeclared or under-declared work.