The ratio of workers who contribute to the IPS, Paraguay’s social security and public health institution, to its retirees could fall from 9.6 to about three per beneficiary by 2050. The projection was presented by José Velázquez, director of the IPS Actuarial Advisory Office, while explaining the effects of population aging on the pension system.
Velázquez stressed that the active-to-retiree ratio, although important, does not by itself determine the institute’s financial situation. It is also necessary to consider the salaries on which contributions are assessed and the value of pensions. Currently, about 78% of contributors earn around the minimum wage corresponding to the category of unspecified diverse activity.
The imbalance is already appearing in the accounts of the IPS Common Pension Fund. Worker and employer contributions do not fully cover benefits, and the system draws on income from reserves invested in the financial market. If current conditions continue without corrective measures, the cited actuarial report projects that all income from the reserves will be used by 2036. From then on, the institute would begin drawing down the principal, with possible depletion around 2046.
More than 70% of retirees receive ordinary pensions, with average amounts ranging from G. 5 million to G. 12 million. The comparison between these payments and contributions is affected by the low wage level of a large share of workers, which is why the current figure of 9.6 contributors per retiree does not eliminate financial pressure.
Demographics add to the challenge. At age 60, men’s average remaining life expectancy, currently estimated at 20 years, would reach 22.6 years by the end of 2050. Among women, it would rise from approximately 23 to 25.5 years. This means pensions would need to be financed for longer periods while the proportional contributor base declined.
Among the alternatives mentioned is a gradual extension of the period used to calculate benefits, which has already increased from 36 to 120 months. Velázquez described the change as a correction but said it alone does not resolve the pension system’s structural problem.