Costa Rica pension fund eyes new crisis date in 2030

A new study conducted by Costa Rica’s social security administration (CCSS) indicates the national pension fund is headed to a crisis in 2030 when pension payments would begin to outpace contributions and interest generated by reserves.

The CCSS fund’s actuarial director Luis Guillermo López reported growing outflows from the IVM (disability, old age and mortality) component of the fund would outpace inputs within 10 years on the current course, according to testimony Wednesday posted to the legislative news service, with the CCSS fund becoming completely exhausted by 2037. 

López, in testimony to a special congressional commission to analyze the fund, highlighted that some of the options for improvements that can be made to the pension fund are the increase in fees, changes in the benefit formula, increase in retirement age, and cost-of-living adjustments, among others. 

López stressed that changing retirement age, currently set to 65, might be the most effective strategy, but added that fund sustainability is also threatened by the ability to make early withdrawals ahead of retirement, and this needs to be addressed as well.

He further said there has been a notable drop-off in contributions and other system inputs as a result of COVID-19 with layoffs and temporary unemployment hitting the labor market. 

Lawmaker Yorleny León Marchena expressed concern about some of the options that are proposed to improve the IVM fund, such as the increase in quotas, adding that doing so could spur a migration of workers from the formal to the informal workforce. 

She said, however, that there are some proposals to change retirement age already circulating in congress.