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Costa Rican pension system : options for reform, Volume 1
 
Author:Demirguc-Kunt, Asli; Schwarz, Anita; Collection Title:Policy, Research working paper ; no. WPS 1483
Country:Costa Rica; Date Stored:1995/06/01
Document Date:1995/06/30Document Type:Policy Research Working Paper
Language:EnglishMajor Sector:(Historic)Social Protection
Region:Latin America & CaribbeanReport Number:WPS1483
Sub Sectors:Pensions & Social InsuranceSubTopics:Information Technology; Environmental Economics & Policies; Economic Theory & Research; Banks & Banking Reform; Pensions & Retirement Systems; Public Health Promotion
Volume No:1  

Summary: The Costa Rican Social Insurance Fund - the country's main social security institution - was established in 1941 to provide compulsory social insurance coverage for employees, through old-age, disability, and survivor pensions, as well as sickness and maternity benefits. The current status of the pension system is alarming, and reform is urgently needed. Among other things: 1) the system is costly to the government; 2) it promises generous benefits that are difficult to sustain; 3) contribution rates are low; 4) the link between contributions and benefits is weak; 5) inflation indexing is inadequate and ad hoc; 6) although there is no explicit early retirement system, individuals have found a substitute for early retirement in disability pensions; 7) health benefits to pensioners are paid out of pension contributions; and 8) the system's reserves have not been well invested. Reform of the system should be immediate. At a minimum, reform should include: reduced benefits; higher contribution rates; a higher retirement age; a stronger link between contributions and benefits; and the unbundling of health and pension accounts.

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