Report Nº: 75828/05/2018
One of the most irresponsible decisions made since the return of democracy was the free granting of 3.5 million retirements to people who had no contributions to the pension system and without any socioeconomic assessment. The challenge now is to correct the inequities and unsustainability caused by this decision. The fiscal result of the first […]
The fiscal result of the first four months of the year shows an increase in public revenues of the order of 21% year-on-year while the expenses in retirements and pensions grew by 31% year-on-year. That is, pension spending continues to rise at a higher rate than income and inflation. Taking into account that retirements and pensions are the main component of the federal primary expenditure (42% of the total), it is a fiscally unsustainable dynamic.
In the search to restore the sustainability of public finances, there are many pending tasks. One of the most important is ordering the federalism transferring federal expenditures currently made in favor of the metropolitan area to the corresponding jurisdiction and eliminate the squander generated by federal programs overlapping with provincial and municipal functions. However, the most outstanding and complex challenge to solve is the ordering of the pension system.
To address this issue it is pertinent to keep an eye on data recently published by the Secretary of Social Security. According to this source, the ANSES (pension agency) pays retirements and pensions to 5.7 million retirees and pensioners of which:
These data show that only 1 of every 3 retirees receives a retirement or a survival pension as compensation for having made the corresponding contributions during their active life. Half receive a retirement or pension thanks to the moratorium that granted benefits without contributions and without assessing the socio-economic situation of the person. The remaining 20% receives double benefit of which the majority does so thanks to the fact that they were granted a second benefit without contributions through the moratoriums. This is a conservative estimate since these statistics do not count pensioners from other pension systems (such as provinces, military, security forces, etc.) who took advantage of the moratoriums to request pensions without contributions to the ANSES.
There is no case in the world of such a massive and indiscriminate distribution of pensions without contributions. By far, it is the most irresponsible measure taken in Argentina since the return of democracy. Instead of limiting and targeting pensions without contributions in vulnerable people, pensions were given as gifts to people who did not make contributions and who were not in a situation of vulnerability, generating an irritating inequity since they were given the same benefits as people who made contributions and, in many cases, now they duplicate with another pension benefit. The other foreseeable consequence is a severe problem of financial unsustainability of the pension system.
In the short term, a palliative could be to establish a double pension inflation adjustment rule. For the benefits with contributions or with moratoriums that reach people in a situation of vulnerability, the general formula should be maintained. For benefits that are doubled or that are a single benefit by moratorium but goes in favor of people with other income, a reduced mobility should be established. With this scheme, it would be possible to ensure that pension spending does not go on rising above inflation, in line with the same rule that the fiscal responsibility stipulates for the rest of the federal and provincial expenditure.
Part of the issue is resolved with the end of the moratoriums in 2019 and its replacement by the Universal Pension for the Elderly. But it remains pending to review the survival pension rule. From the point of view of equity and sustainability there should be no survival pension when the spouse has another pension benefit. In contrast, the coverage –nowadays not contemplated– of the offspring who study and have no other means of living when their parents die should be considered.