Policies for the elderly

Old age presents important challenges in terms of social inclusion in Latin America and the Caribbean, particularly in terms of guaranteeing adequate income and access to essential services. The consequences of inequalities accumulated throughout the life cycle, such as the higher incidence of labor informality and the lack of access to social protection mechanisms, become more evident at this stage. This section explores the policies needed to strengthen the economic protection of the elderly through more inclusive pension, health and care systems.

Protecting income in old age through pension systems

Old age poses major challenges in terms of economic autonomy. At this stage of life, ensuring economic security is essential to enable people to maintain a decent standard of living. Pension systems play a central role in this process, providing income during old age and protecting the population in the event of disability or death of a spouse. However, the high levels of informality in the labor markets of Latin America and the Caribbean have caused a significant proportion of the population to face old age without having met the necessary requirements to access contributory pensions, leaving many people in a situation of economic vulnerability (Álvarez et al., 2020). This is especially relevant for women, who have lower labor participation, are more exposed to informality and have a longer life expectancy. 

Non-contributory pension systems have been a key policy for guaranteeing basic income to the most vulnerable groups during old age. Since the 2000s, coverage has expanded across several countries in the region, approaching universalization in some. However, in countries where contributory pension coverage is low (less than 40 % of the elderly population receives a contributory pension), the expansion of non-contributory pensions has been limited, as in the Dominican Republic, El Salvador, Guatemala, Nicaragua, Colombia, Peru and Ecuador (figure 3.15.A).

The adequacy of non-contributory pensions remains a major challenge. A recent study by Vila et al., (2024) shows that, on average, the value of benefits as a percentage of the poverty line has increased by 11 percentage points over the last 12 years, from 81 % in 2010 to 92 % in 2022. However, there is considerable heterogeneity across countries. While in Argentina, Brazil, Chile and Uruguay pensions are above the poverty line, in Bolivia, Colombia, El Salvador and Peru the value of benefits is very low, below 50 % of the reference line. Other countries such as Costa Rica, Ecuador, Mexico and Panama have intermediate levels, with pensions between half and the poverty line (figure 3.15.B).

A key challenge for pension systems in the region is to achieve universal coverage that ensures beneficiaries a minimum level of income that allows them to avoid poverty. Given the high level of labor informality, this implies, in practice, continuing to extend non-contributory pensions. The challenge is not to create new programs, since most countries have already developed them, but to expand their coverage and, in some cases, increase benefit amounts.

According to estimates made for the RED (Álvarez et al., 2020), universalizing pension coverage would have an average cost of between 0.18 % and 0.24 % of GDP, depending on whether beneficiaries obtain a pension of USD 4 per day (in purchasing power parity) or the amount of the main non-contributory pension in each country. In the first case, the greatest challenge is faced especially by countries with low pension coverage in general, while, in the second case, it would be faced by countries with high amounts of current pensions (such as Brazil and Uruguay). These figures could almost triple (0.53 % and 0.66 % of GDP, respectively) considering the demographic transition that countries will experience in the next 30 years. This aging is occurring much faster in the region than in developed economies that have already undergone this process. The necessary reforms will therefore have to respond promptly to these demographic dynamics. 

Given the growing need for resources, another fundamental challenge for pension systems, both in their contributory and non-contributory components, is to ensure their financial sustainability. This can be achieved through measures such as increasing workers’ contribution rates, expanding the number of contributors (through higher levels of labor participation of women and older adults, as well as reducing informality), increasing general taxes or modifying the requirements for minimum years of contribution and retirement age. It is also essential to simplify and make the contributions of self-employed workers mandatory. These challenges vary considerably across countries in the region, so each will require a specific policy mix (Álvarez et al., 2020).

Guaranteeing access to adequate health and care coverage

In most Latin American and Caribbean countries, access to health services is linked to labor formality or to the enjoyment of a contributory pension. This leaves a significant part of the population outside the contributory-based health system. Brazil is an exception, with a universal health system. For older adults who face higher risks of «catastrophic» health expenditures—those who exceed 10 % of household income—this situation is especially critical (Álvarez et al., 2020).

Non-contributory health systems are essential to ensure access to medical services for vulnerable groups of all ages. However, there are significant quality gaps between contributory and non-contributory systems, which generate inequalities in access to the services needed to treat chronic conditions and prevent health problems in older adults (Bancalari et al., 2024). Although these have expanded in the region, the focus of benefits has been mainly on the maternal and child population.

In order to improve equity in access to health care, it is essential to improve coverage for those who are not covered by the contributory systems and to develop explicit plans that ensure access to quality essential medical services for the entire population. One advantage of explicit health plans is that they allow for efficient targeting of resources, improving the use of spending in this area by concentrating on preventive and curative services that have a greater impact.

However, the aging of the population also generates a growing demand for care services. In Latin America, most care for the elderly is informal and falls mainly on the families themselves, especially women. This lack of State policies generates a gap in formal support for older people who require assistance with daily activities and, at the same time, burdens families who face economic and time availability difficulties. The development of policies such as home care services, day centers and support programs for informal caregivers is essential to respond to the rapid aging of the population in the region (Álvarez et al., 2020).