The pension system in the Dominican Republic faces structural challenges that cannot be ignored. Labor informality, low contributions and the retirement age are issues that require attention.
There is a reality that cannot be hidden: 60% of the Dominican population does not pay contributions, which means that a significant majority will not have access to a pension in the future. It sounds harsh, but it is true. As far as we know, this problem is not exclusive to the Dominican Republic, but is common throughout Latin America. In some countries, a little more, or a little less, but high informality in the end.
It is an obstacle to social security. A solidarity pension scheme could be a viable solution for those who cannot access a contributory pension. At least that is what specialists in the field say. The experience of other countries shows that a solidarity scheme is effective in expanding coverage and guaranteeing a more inclusive social protection network.
Another crucial aspect is the gradual increase in contributions. The current 8.4% is insufficient to guarantee adequate pensions. It has already been said that a gradual policy of raising contributions up to 15% could provide a more solid basis for the pension system. This increase should not be abrupt, but progressive, to allow workers and employers to adapt to the changes without creating an excessive burden.
The retirement age is under debate (60 years or older is the local age); a review is required – some experts say – because life expectancy has increased, and the retirement age needs to be adjusted accordingly.
In some countries – Spain, for example – incentives have been implemented for people to choose to delay their retirement, which could be an effective strategy to balance the pension system in the Dominican Republic.
The recent Second Biennial Congress on Health and Social Security addressed the need for a comprehensive reform that includes investment diversification, unemployment protection and the implementation of minimum contributory and universal pensions. Diversifying investments is positive for ensuring the profitability of funds and promoting the country’s economic development. Work is being done on this area, and it is very good.
Recent figures from the Superintendency of Pensions indicate that more than 50% of the country’s provinces benefit from pension fund investments in various projects. These investments have boosted the stock market, promoted formal savings and contributed to job creation.
It is essential to continue in this direction.
