- Introduction
Law #24 on Social Security is the main piece of legislation defining the benefits that are covered under Social Security in Cuba. This Law, which was approved on August 28, 1979, and the subsequently adopted Social Security regulations provide the legal framework to provide old age retirement, disability, and survivor’s pensions to Cuban workers and their families. The benefit promises in the Law are probably the most far reaching legacy of Cuba’s revolution. They are meant to apply when the current leadership is not longer alive, and the current generation of workers have been substituted by a younger workforce. This younger workforce was not even born when the legislation took effect, and will be asked to pay for the promises that their predecessors made to themselves.
This paper outlines the results of a preliminary actuarial analysis of Law #24. This analysis was conducted through an actuarial model that estimates the retirement pensions of the current working population and those who are expected to enter the workforce during the years between 1991 and 2010. The model is also used to estimate the cost of providing retirement benefits as a percentage of the salaries which these workers are expected to receive during their entire career.
The results of the actuarial model support the idea that changes are needed to both the current benefit promises as well as the financing of those promises. This paper explores the cost effect of two benefit changes: postponing the retirement age to 65, and the elimination of the current retirement benefit promise for those younger than 45 on January 1, 1995. It also outlines a mechanism to improve the financing of retirement benefits through the funding of the pension obligations during the active service of the system participants.
II. Law # 24 on Social Security
Law # 24 on Social Security (The Law) and the subsequently adopted Regulations of the Social Security Law provide for two regimes of social benefits: Social Security and Social Assistance. The Social Security regime provides benefits for insured participants and their beneficiaries, while the Social Assistance regime provides benefits for those persons who are not insured under the Social Security regime. The Law includes in the Social Security regime all individuals who receive salaries or wages f or their work in Cuba and those who work for Cuban entities abroad. It also extends coverage to the families of the workers included in the Social Security regime.
The Social Security regime provides three kinds of benefits: those provided through services, those provided in kind, and those provided through monetary payments. Benefits provided through services include medical and dental assistance provided through health professionals and facilities. Benefits provided in kind include medicines for hospitalized patients, and prosthetic devices for disabled workers. Benefits provided through monetary payments include pensions paid to old age retirees, disabled individuals, surviving spouses and children of insured individuals, female participants during their maternity leave, and employees who fall ill or become injured.
In 1989, old age retirement, disability, and survivor’s pensions amounted to $1,042.5 billion of the
$1,282.6 billion paid through Social Security. For the same year, the second largest Social Security monetary expenditure was for sickness, accident, and maternity subsidies which together totaled $178.9 million. Both of these expenditures constituted 95 percent of all Social Security expenditures through monetary payments for that year.
A. Retirement Pensions under the Law
Old age retirement pensions can be paid after a service period of 25 years. Ordinary retirement age is 60 for men and 55 for women, except for those who have worked at least 12 years in dangerous conditions who can retire 5 years earlier. Employee s can retire with an extraordinary pension after 15 years of service once they reach a late retirement age of 65 for men, and 60 for women.
The old age pension equals 50 percent of the average salary (of the best five of the last ten years) plus either 1 percent or 1.5 percent of average salary per year of service in excess of 25. There are increases for ordinary retirement after age 60/55. The extraordinary retirement pension formula is equivalent to the ordinary retirement formula. The annual average salary used to calculate the retirement pension is reduced by 50 percent for the amount in excess of $3,000.
B. Disability Pensions under the Law
According to the Law disability pensions are paid under both temporary disability and total or partial disability. The temporary disability benefit is set equal to a fixed percentage of the salary at time of disability. This percentage varies according to whether the disability is due to occupational injury or sickness, and whether the worker is hospitalized. The total or partial disability formula is very similar to the old age retirement benefit formula except that it takes into account expected future years of service for those who become disabled before age 45 and do not yet have 25 years of service.
C. Survivor’s Pensions under the Law
Social Security pensions are also paid to surviving spouses and relatives of covered workers and pensioners. The surviving spouses eligible for a Social Security pensions are the wives of covered workers, and the husbands of covered workers who are economically dependent on their working or pensioner wives. Pensions are also paid to dependent children and parents.
There are two types of survivor’s pensions: the provisional pension which lasts up to three months after death, and the definitive pension which is paid after the provisional pension. The amount of the definitive survivor’s pension is equal to a percentage, which varies according to the number of beneficiaries, of the Social Security pension the deceased worker would have received had he retired or become disabled at the date of death. The survivor’s pension is adjusted for duration and amount depending on whether the surviving wife works or not.
D. Financing of the Law’s Benefit Promises
The Law does not address two significant aspects of other Social Security systems: financing of the Social Security benefits, and periodic updates of the amounts established in the Law. The financing of Social Security benefits is done through the payment of a percentage of total payroll by the employer to the state. This percentage has normally being 10 percent but it can be changed through the State Budget Law.
The second aspect which is not addressed in the Law is the issue of periodic updates for pensions in payments, and amounts defined in the Law. This leads one to conclude that either at the time of enactment there was an expectation of little or no future inflation, or a deliberate desire to allow pensions to deteriorate over time.
III. The Preliminary Actuarial Model
The preliminary actuarial model of Cuban Social Security focuses on old age retirement pensions as the main cause of payouts from the system. As mentioned in the previous section, most Social Security payments are due to old age retirement, disability, and survivor’s pensions, and the Model assumes that most of those payments are due to old age retirement. Payments for short term disability, sickness and maternity are also ignored.
A. Benefits Valued in the Model
The model assumes that all pensions paid under Social Security are due to old age retirement. Old age retirement is assumed to occur at age 60 for men, and age 55 for women under the current system scenarios, and 65 for men and women under the alternate scenarios. Upon death after old age retirement, it is assumed that 70 percent of the old age pension is continued to be paid to the surviving widow, but no payment is made for surviving widowers.
B. Demographic Data
The model begins its projection period on January 1, 1991 using the distribution by age and sex of the Cuban population as of December 31, 1990. The population distribution by age for those older than 25 and younger than 65 was obtained by distributing the published quinquennially grouped population assuming uniform number of births during the five years of the quinquennial group. The population over age 65 was distributed between age 65 and 80 by assuming a uniform number of annual births for all the members of this group. The actual number of people in each single age reflected the effect of mortality since date of birth. Table I shows the assumed number of individuals for each age and sex on January 1, 1991.
It was assumed that all the males older than 59, and all the females older than 54, were old age pensioners with an average monthly pension of $78 ($936 per year). All those younger than ordinary retirement age and older than 15 were assumed to be eligible to participate in the Social Security system as active participants with an average monthly average salary of $188 ($2,256 per year) in 1991. Active participants are expected to earn pensionable service according to an estimate of the general employment level for each age. Table II shows the percentage of the population which is assumed to be employed at each age.
New entrants into the Social Security system are assumed at the beginning of each year from 1992 through 2010. These new entrants are assumed to be 15 at time of entry into the model, and to have an annual salary of $2,400 adjusted for future salary increases. They are equally distributed between males and females. The number of new entrants for each projection year before 2006 was based on the projection of the December 31,1990 data to the entry date adjusting for mortality. The number of annual new entrants after 2005 was calculated based on an estimate of the number of births from 1991 and 1995 surviving to the entry year. Table III shows the assumed number of new entrants for each year from 1992 to 2010.
C. Economic Assumptions
The model uses four main economic variables: long term interest rate, long term salary increase rate, rate of Social Security increases to legally defined amounts, and rate of inflation. By changing these economic variables ,three economic scenarios were developed to measure the costs and liabilities of the Social Security system. The economic scenarios were: Socialist Stasis, Caribbean Basin Initiative-Real, and Caribbean Basin Initiative-US$ Nominal.
The Socialist Stasis scenario assumed that all economic variables were equal to 0 percent. This scenario reflects an economy which is fully indexed and where there are no costs associated with the borrowing of money.
Caribbean Basin Initiative-Real scenario assumed that there would be a real (net of inflation) interest rate of 6 percent, and that salaries would increase in real terms beginning in 1998 at .7 percent and at 2.3 percent after 2002. There would be no adjustments to pensions in payment and Social Security amounts will remain fixed.
Caribbean Basin Initiative-US$ Nominal scenario reflects a situation where the Cuban economy will be US$ denominated but that there would still be a small risk differential in interest rates between the US long term interest rates and Cuba’s. This scenario assumes an interest rate of 9 percent, salary increases starting at 3 percent through 1997, 3.7 percent for the years 1998 through 2002, and 5.3 percent after 2002. Social Security amounts are assumed to be indexed at a rate of 3 percent. Pensions in payment are not indexed with inflation. This scenario uses an underlying assumption of US$ inflation of 3 percent.
Table IV in the Appendix summarizes the economic assumptions used for each scenario.
D. Actuarial Assumptions
The Model uses a table of probabilities of death during a particular age based on both published Cuban data, and US data. Mortality rates for each age between age 0 and age 79 were developed from the expected life for single ages from age 0 through age 80.
Mortality rates from age 80 to 100 were developed adjusting the 1970 US Census mortality to match the expected life at age 80 published by Cuban sources. Table V in the Appendix shows the probabilities of death at each age between 0 and 100 for male s and females separately.
The Model assumes that the only reasons to exit the Social Security system are death or old age retirement. Old age retirement is assumed to occur at age 60 for males, and 55 for females, except in the alternate scenarios when retirement is assumed to occur at age 65.
E. Actuarial Method
The model is used to estimate three sets of figures: the total pensions paid to active participants during the valuation period (1991 to 2100), the salaries paid during the valuation period to active participants who were in the Social Security system during the projection period (1991 to 2010), and the present value of those two items at the beginning of each year during the projection period.
The total pension payments expected to be made in the kth year after January 1, 1991 is calculated as follows:
B1991+k = … cx k px b x::k where
cx is the number of participants of age x alive on January 1, 1991,
k p x is the probability of surviving to age x+k for someone age x,
b x:k is the average pension paid during year k to individuals age x on January 1, 1991.
It must be noted that b x:k is equal to zero before retirement. At retirement date it is equal to 2 percent of final pensionable pay times years of accrued service less than 25 plus 1 percent of final pensionable pay times years of accrued service i n excess of 25. Final pensionable pay is equal to the average of the last five years of annual salary preceding retirement. Years of accrued service reflect the percentage of people working at each age.
The total salaries expected to be paid during a particular year were calculated as follows:
S1991+k = … cx k px s x:k ex where
cx is the number of participants of age x alive on January 1, 1991, k p xis the probability of surviving to age x+k for someone age x,
S x::k is the average salary paid during year k to individuals age x on January 1, 1991.
S x:k is set equal to zero for x+k greater than retirement
ex is the percentage of the population age x who are actively employed.
The present value of future benefits (PVFB) and the present value of future salaries (PVFS) were calculated by discounting the series of payments, B1991+k ,and S1991+k, to a particular date. The ratio of present value of future benefits to the present value of future salaries was used to determine the contribution percentage required to finance the future benefits of all the active participants in the Social System at a particular date.
The calculation of the present values was facilitated by the use of the standard actuarial commutation functions Dx and Nx (12). They were also used to reflect monthly payments of pensions and salaries.
IV. Problems With the Cuban Social Security Retirement Promise
Social Security benefits are normally financed through two mechanisms: payroll taxes, and general revenue. If one assumes that the economy and the population will continue to grow into the future, one can finance future pension payments out of future salaries. This method is normally known as the payas-you-go system. Under this system, future payroll taxes may not be sufficient to meet future pension payments under a variety of scenarios.
At least three of those scenarios are relevant to Cuba. The first is that over time, as shown in Table VI, the proportion of the working age population to the population eligible for retirement increases from 4.53 potential workers per potential retiree in 1991 to an estimated 3.24 potential workers per potential retiree in 2010. The second is that there is a generation of Cuban workers which is much larger than the following generation of workers. These workers were born during a “baby boom” which lasted from 1960 through 1980, and they are followed by a smaller generation of workers which were born during the “baby bust” of the following years.
Another problem with the Cuban Social Security system is that it promises a very large pension of at least 50 percent of final average pay after 25 years of service. A simple calculation, assuming no inflation, no salary increases, and an interest r ate of 0 percent, shows that a new entrant into the system who works for 40 years, and then lives for 20 years after retirement will have to contribute 32.5 percent of salary during his work career to accumulate at retirement an amount equal to the expected benefit payments.
Another problem of the system is the absence of any assets designated to meet the existing pension obligations of the current retirees. This means that the Cuban “baby boomers” will have to pay the pensions of their older countrymen and at the same time make some provision for their old age retirement since the following generation is smaller and less able to sustain them in their retirement.
V. Funding the Social Security Retirement Promise
One can measure the financial burden of retirement pension system by comparing the present value of future pensions to the present value of future salaries for current participants in the system. The resulting ratio can be used to determine a contribution rate as a percentage of salary. This ratio does not reflect inter-generational financing since it does not take into account the future salaries of generations not contributing to the system yet, but it is an appropriate measure of the overall cost of the retirement promise that current participants have made to both the current pensioners and themselves.
The Model was used to determine a contribution rate as a percentage of salary under each of the three economic scenarios. The results for the current Social Security system are shown in Table VII. It is clear that under the Socialist Stasis scenario, the current Social Security system can only be financed by general revenues and future yet to be quantified inter-generational transfers of wealth. This scenario assumes no inflation, no salary increases, and no discount rate.
The two Caribbean Basin Initiative scenarios show more moderate contribution rates of between 27 percent and 34 percent in 1991 but which increase to 30 percent and 41 percent by 2010. The reduction in the contribution rate for those scenarios is largely due to the introduction of an interest rate of 6 percent and 9 percent with no adjustment of the pensions after payment commencement.
The increase in the contribution rates over time is due to the aging of the population and the fact that there are no accumulated assets to meet future obligations. The above contribution rates assume that there are no assets accumulated between valuation dates, but that assets would be accumulated starting on the valuation date. The above contribution rates are greater than the contribution rate needed to pay pensions in payment in a given year, but they are meant to reduce the contribution rate i n the following years.
Even under the CBI scenarios the contribution rates are excessive since they are only financing a portion of the total Social Security system. It should be noted that the current contribution rate for the entire Cuban Social Security system is 10 per cent of salaries. These high contribution rates indicate that the system will significantly reduce the income of current workers if they are to pay the pensions of current pensioners as well accumulate funds for their retirement pensions.
VI. Improving the Soundness of the Retirement Promise
This paper will explore three possible changes to the Social Security system as to improve the soundness of the retirement promise. All are aimed to stabilize and reduce the contribution rate over the long term.
A. Postponing Retirement
The current retirement age of 60 for men, and 55 for women is low when compared to other countries in Latin America and the OECD. Increasing the normal retirement age to 65 would improve the financial health of the system by increasing contributions from workers who remain active longer, and by shortening the number and deferring the start of the pension payments.
As shown in Table VIII, the contribution rates are reduced from their current levels under all three scenarios if one postpones retirement to 65. Nonetheless they remain very high under Socialist Stasis, and somewhat high under the CBI scenarios.
B. Changing the Current Retirement Promise for Younger Workers
One radical departure from the current Social Security system would be to eliminate the retirement promise of Law #24 for younger workers, and instead to provide their retirement income through the accumulation of their contributions into individual accounts. There are various Social Security systems around the world which are based on similar arrangements of accumulating Social Security contributions into individual accounts. The oldest and best known in the Americas is the Chilean Social Security system. This system is also used in various Asian and African countries where it is known under the name of Provident Funds.
The pensions of older workers and current retirees will continue to be paid through payroll taxes levied on all workers. The required contribution rates to pay the pensions of older workers are shown in Table IX if one assumes that the cutoff age f or participation in the current system is 45 on January 1, 1995.
By excluding the younger workers, the contribution rate falls significantly for the Socialist Stasis scenario and is also reduced for the CBI scenarios. The trend in the contribution rate is down over time, as there are less and less pensions to be paid out of the old system. This new system requires the setting of two contribution rates: one to finance the retirement promise of those older than 45 at the time of transition, and another to finance the retirement promise of those younger than 45.
There are two choices in setting the contribution rate to finance the pensions of the older population: to set it in order to pay only pensions as they are paid, or to set it so that only the current participants in the system will pay these pensions. The contribution rates under the first scenario are shown in Table X for select years. This table shows the ratios of expected total salaries to expected total pensions during the projection period. The contribution rates required to finance the current pensions through only the contributions of the current active participants are shown in Table IX.
The contribution rate required for those younger individuals excluded from the current system depends mainly on the following: the target replacement rate, the investment return of the accumulated contributions, and the salary increase history of the participant. An adequate target replacement rate could be 50 percent of final salary at age 65 after 30 years of contributions with a 70 percent continuation of the pension to the surviving spouse of the retiree. The contribution rate that is required to accumulate a fund at retirement equal to the present value of such target benefit would range from 9 percent under the CBI US$ Nominal scenario to 10.5 percent under the CBI Real scenario to 32 percent under the Socialist Stasis scenario.
These contribution rates were derived assuming that the accumulated contributions would earn interest at the same rate assumed in each scenario, and that the salaries of the participant would increase at the ultimate rate assumed in each scenario: 0 percent,2.3 percent, or 5.3 percent. The accumulated funds were converted to a pension using annuity factors developed using the mortality shown in Table V and the interest rate of each scenario.
C. Funding the Retirement Promise
The contribution rates mentioned so far are based on the assumption that on any particular date there are no assets corresponding to the retirement obligations. On the other hand, they presuppose that future contributions in excess of future benefit payments will be accumulated in a fund. The existence of assets reduces the required level of contributions therefore it would be appropriate to fund a portion of the retirement promise to those remaining in the current system through the establishment of a Social Security Fund.
There are two possible sources of contributions to this Social Security Fund. The first source consists of moneys collected through payroll taxes. This paper has discussed extensively the required level for those contributions. The second possible source would be cash or equity derived from the privatization of state assets. The determination of which state assets should be transferred to this Fund is beyond the scope of this paper, but it should be considered as a mechanism to reduce the burden of financing the current retirement promise through payroll taxes.
VII. Certain Limitations of the Model
This Model of Cuban Social Security is not a budgeting tool, but rather an experimental and analytical aid. As such, it ignores some significant aspects of the current Social Security system in Cuba which are noted below.
A. Limitation to Retirement Benefits
The Model ignores other monetary benefits paid through the Law: disability, death in service, and maternity payments. Disability benefits were not included in this Model because there was no data available on either current disabled pensioners in Cuba, nor the incidence of disability among Cuban workers. Death in service pensions were ignored in order to simplify the Model and to make it reproducible by other researchers. Maternity subsidies were excluded also for the sake of simplicity.
Based on the Chilean Social Security experience, which privately insures disability and survivor’s pensions through payroll taxes of between 2.5 percent and 3.74 percent of pay, one can estimate that including disability and survivor’s coverage into the Model would cost between 4.0 percent and 4.5 percent of pay.
B. Other Social Security Systems
Law #24 is the main but not the only legislation regarding Social Security in Cuba. The Armed Forces, and the Ministry of Interior personnel are covered under Laws #101, and #102. The terms and amounts of their benefits exceed those of Law #24. In view that a conservative estimate of the personnel in both of these entities is around 250,000, a serious reform of Cuban Social Security must address the financing of these benefits. The lack of demographic data on the population covered under Laws #101, and #102 is the main obstacle to modeling their Social Security obligations.
There are other sectors of the Cuban population that are also not covered by Law #24. The results from the Model are misleading in so far that we assumed that all potentially economically active Cubans are covered under Law #24.
C. Economic Assumptions
The three economic scenarios were derived from either existing conditions (Socialist Stasis), or two possible transition scenarios derived from Armando Lago and José Alonso’s seminal paper (CBI Real and CBI-US$ Nominal). The results produced under each scenario will be invariant under actual inflation so long as it affects equally interest rates, salary increases, social security increases, and pension increases. This is not a realistic assumption in a high inflation environment when salary increases tend to trail inflation, interest rates reflect estimated inflation risks, and pensions are adjusted on an ad-hoc basis.
D. Employment and Contribution Assumption
The Model assumes that a percentage of the population at each age will be working and therefore contributing to the Social Security system. This percentage remains constant during the projection period. The reality is likely to be quite different during an economic adjustment period when the number of workers in Cuba would decrease as a percentage of the working age population. Also it is not clear that the all workers would participate in the System as there would be a considerable short-term financial benefit to those workers who avoid the payroll tax associated with contributions to the System.
Non-participation in the system would not generate additional costs as long as the benefits paid out of the system to a given participant are set according to the contributions made by that participant to the system as is the case for the proposed system for younger participants. Evasion of payroll taxes by active participants will increase the contribution rate required to pay the pensions for current pensioners, and it may increase the contribution rate required to pay the pensions of future pensioners.
VIII. Concluding Observations
The current Cuban Social Security system requires large amounts of contributions to finance the retirement benefit promised to its participants. Changing the retirement age to 65 for men and women would reduce the level of contributions required to finance the current System but these contributions would remain large as a percentage of payroll. Changing the current system from a pay-as-you-go system to one where younger workers will accumulate funds toward their retirement would greatly reduce the burden of making inter-generational transfer payments. There would still be a significant transfer of funds from workers to current pensioners and older workers who remain in the current System but those contributions could be reduced by the creation of a Social Security Fund with contributions of payroll taxes and state assets.
Table I
Distribution of Cuban Population by Attained Age and Sex at January 1, 1991
| Age | Males | Females | Total | Age | Males | Females | Total | ||||||
| 0 | 96062 | 88,854 | 184,916 | 40 | 66,670 | 68,273 | 134 ,943 | ||||||
| 1 | 94,641 | 88,209 | 182,850 | 41 | 66,482 | 68,130 | 134,612 | ||||||
| 2 | 95,356 | 90,541 | 185,897 | 42 | 66,271 | 68,003 | 134,274 | ||||||
| 3 | 90,418 | 85,915 | 176,333 | 43 | 66,055 | 67,836 | 133,891 | ||||||
| 4 | 83,750 | 79,153 | 162,903 | 44 | 65,833 | 67,683 | 133,516 | ||||||
| 5 | 90,355 | 86,421 | 176,776 | 45 | 59,218 | 60,015 | 119,233 | ||||||
| 6 | 82,450 | 78,834 | 161,284 | 46 | 58,989 | 59,838 | 118,827 | ||||||
| 7 | 82,172 | 78,132 | 160,304 | 47 | 58,735 | 59,656 | 118,391 | ||||||
| 8 | 79,195 | 75,829 | 155,024 | 48 | 58,455 | 59,469 | 117,924 | ||||||
| 9 | 67,746 | 64,486 | 132,232 | 49 | 58,168 | 59,259 | 117,427 | ||||||
| 10 | 67,742 | 64,590 | 132,332 | 50 | 52,087 | 52,065 | 104,152 | ||||||
| 11 | 70,699 | 66,778 | 137,477 | 51 | 51,776 | 51,852 | 103,628 | ||||||
| 12 | 72,215 | 69,186 | 141,401 | 52 | 51,437 | 51,616 | 103,053 | ||||||
| 13 | 81,014 | 77,155 | 158,169 | 53 | 51,089 | 51,354 | 102,443 | ||||||
| 14 | 91,442 | 86,932 | 178,374 | 54 | 50,689 | 51,085 | 101,774 | ||||||
| 15 | 94,056 | 90,898 | 184,954 | 55 | 40,685 | 40,767 | 81,452 | ||||||
| 16 | 97,075 | 94,616 | 191,691 | 56 | 40,327 | 40,507 80,834 | |||||||
| 17 | 110,273 | 105,853 | 216,126 | 57 | 39,941 | 40,223 80,164 | |||||||
| 18 | 120,445 | 116,438 | 236,883 | 58 | 39,544 | 39,931 79,475 | |||||||
| 19 | 122,726 | 117,625 | 240,351 | 59 | 39,097 | 39,595 78,692 | |||||||
| 20 | 112,134 | 108,440 | 220,574 | 60 | 36,450 | 36,382 72,832 | |||||||
| 21 | 115,935 | 111,416 | 227,351 | 61 | 35,948 | 36,036 71,984 | |||||||
| 22 | 116,782 | 112,412 | 229,194 | 62 | 35,432 | 35,644 71,076 | |||||||
| 23 | 116,430 | 112,026 | 228,456 | 63 | 34,862 | 35,241 70,103 | |||||||
| 24 | 122,265 | 120,452 | 242,717 | 64 | 34,235 | 34,788 69,023 | |||||||
| 25 | 117,826 | 116,502 | 234,328 | 65 | 36,345 | 35,534 71,879 | |||||||
| 26 | 117,223 | 115,877 | 233,100 | 66 | 35,585 | 34,997 70,582 | |||||||
| 27 | 114,238 | 113,029 | 227,267 | 67 | 34,784 | 34,444 69,228 | |||||||
| 28 | 109,260 | 108,053 | 217,313 | 68 | 33,938 | 33,874 67,812 | |||||||
| 29 | 101,582 | 100,356 | 201,938 | 69 | 33,048 | 33,241 66,289 | |||||||
| 30 | 85,636 | 86,398 | 172,034 | 70 | 32,111 | 32,566 64,677 | |||||||
| 31 | 77,320 | 77,893 | 155,213 | 71 | 31,101 | 31,823 62,924 | |||||||
| 32 | 71,290 | 71,750 | 143,040 | 72 | 30,044 | 31,034 61,078 | |||||||
| 33 | 68,946 | 69,376 | 138,322 | 73 | 28,885 | 30,148 59,033 | |||||||
| 34 | 68,482 | 69,340 | 137,822 | 74 | 27,681 | 29,189 56,870 | |||||||
| 35 | 71,857 | 72,538 | 144,395 | 75 | 26,406 | 28,131 54,537 | |||||||
| 36 | 71,696 | 72,437 | 144,133 | 76 | 25,009 | 26,948 51,957 | |||||||
| 37 | 71,531 | 72,334 | 143,865 | 77 | 23,582 | 25,700 49,282 | |||||||
| 38 | 71,362 | 72,228 | 143,590 | 78 | 22,074 | 24,389 46,463 | |||||||
| 39 | 71,171 | 72,120 | 143,291 | 79 | 20,552 | 23,020 43,572 | |||||||
| 80 | 18,784 | 21,559 40,343 | |||||||||||
Table II
Percentage of Cuban Population expected to be Employed by Attained Age and Sex
Age Males Females Age Males Females
< /TR> < /TR> < /TR> < /TR> < /TR>
| 0 | 0 percent | 0 percent | 40 | 83 percent | 54 percent | ||||||
| 1 | 0 percent | 0 percent | 41 | 83 percent | 54 percent | ||||||
| 2 | 0 percent | 0 percent | 42 | 83 percent | 54 percent | ||||||
| 3 | 0 percent | 0 percent | 43 | 83 percent | 54 percent | ||||||
| 4 | 0 percent | 0 percent | 44 | 83 percent | 54 percent | ||||||
| 5 | 0 percent | 0 percent | 45 | 76 percent | 40 percent | ||||||
| 6 | 0 percent | 0 percent | 46 | 76 percent | 40 percent | ||||||
| 7 | 0 percent | 0 percent | 47 | 76 percent | 40 percent | ||||||
| 8 | 0 percent | 0 percent | 48 | 76 percent | 40 percent | ||||||
| 9 | 0 percent | 0 percent | 49 | 76 percent | 40 percent | ||||||
| 10 | 0 percent | 0 percent | 50 | 76 percent | 40 percent | ||||||
| 11 | 0 percent | 0 percent | 51 | 76 percent | 40 percent | ||||||
| 12 | 0 percent | 0 percent | 52 | 76 percent | 40 percent | ||||||
| 13 | 0 percent | 0 percent | 53 | 76 percent | 40 percent | ||||||
| 14 | 0 percent | 0 percent | 54 | 76 percent | 40 percent | ||||||
| 15 | 0 percent | 0 percent | 55 | 76 percent | 14 percent | ||||||
| 16 | 0 percent | 0 percent | 56 | 76 percent | 14 percent | ||||||
| 17 | 35 percent | 24 percent | 57 | 76 percent | 14 percent | ||||||
| 18 | 35 percent | 24 percent | 58 | 76 percent | 14 percent | ||||||
| 19 | 35 percent | 24 percent | 59 | 76 percent | 14 percent | ||||||
| 20 | 35 percent | 24 percent | 60 | 22 percent | 1 percent | ||||||
| 21 | 35 percent | 24 percent | 61 | 22 percent | 1 percent | ||||||
| 22 | 35 percent | 24 percent | 62 | 22 percent | 1 percent | ||||||
| 23 | 35 percent | 24 percent | 63 | 22 percent | 1 percent | ||||||
| 24 | 35 percent | 24 percent | 64 | 22 percent | 1 percent | ||||||
| 25 | 72 percent | 52 percent | 65 | 5 percent | 1 percent | ||||||
| 26 | 72 percent | 52 percent | 66 | 5 percent | 1 percent | ||||||
| 27 | 72 percent | 52 percent | 67 | 5 percent | 1 percent | ||||||
| 28 | 72 percent | 52 percent | 68 | 5 percent | 1 percent | ||||||
| 29 | 72 percent | 52 percent | 69 | 5 percent | 1 percent | ||||||
| 30 | 72 percent | 52 percent | 70 | 5 percent | 1 percent | ||||||
| 31 | 72 percent | 52 percent | 71 | 5 percent | 1 percent | ||||||
| 32 | 72 percent | 52 percent | 72 | 5 percent | 1 percent | ||||||
| 33 | 72 percent | 52 percent | 73 | 5 percent | 1 percent | ||||||
| 34 | 72 percent | 52 percent | 74 | 5 percent | 1 percent | ||||||
| 35 | 83 percent | 54 percent | 75 | 5 percent | 1 percent | ||||||
| 36 | 83 percent | 54 percent | 76 | 5 percent | 1 percent | ||||||
| 37 | 83 percent | 54 percent | 77 | 5 percent | 1 percent | ||||||
| 38 | 83 percent | 54 percent | 78 | 5 percent | 1 percent | ||||||
| 39 | 83 percent | 54 percent | 79
80 and Older |
5 percent
5 percent |
1 percent
1 percent |
||||||
Table III
Distribution of Active Population by Date of Entry into the Social Security System
| Year | Entry before 1991 | Entry after 1990 | Total | |||||
| 1991 | 6,776 | 6,776 | ||||||
| 1992 | 6,760 | 89 | 6,849 | |||||
| 1993 | 6,654 | 247 | 6,901 | |||||
| 1994 | 6,549 | 387 | 6,936 | |||||
| 1995 | 6,443 | 525 | 6,968 | |||||
| 1996 | 6,337 | 656 | 6,993 | |||||
| 1997 | 6,231 | 772 | 7,003 | |||||
| 1998 | 6,110 | 924 | 7,034 | |||||
| 1999 | 5,988 | 1,083 | 7,071 | |||||
| 2000 | 5,866 | 1,242 | 7,108 | |||||
| 2001 | 5,744 | 1,417 | 7,161 | |||||
| 2002 | 5,621 | 1,566 | 7,187 | |||||
| 2003 | 5,487 | 1,739 | 7,226 | |||||
| 2004 | 5,352 | 1,922 | 7,274 | |||||
| 2005 | 5,218 | 2,101 | 7,319 | |||||
| 2006 | 5,083 | 2,280 | 7,363 | |||||
| 2007 | 4,948 | 2,453 | 7,401 | |||||
| 2008 | 4,804 | 2,636 | 7,440 | |||||
| 2009 | 4,660 | 2,818 | 7,478 | |||||
| 2010 | 4,516 | 2,998 | 7,514 | |||||
Table IV
Main Economic Assumptions used under each Scenario
Socialist Stasis CBI –
Real
1 Interest Rate 0.00 percent 6.00 percent
CBI-US$
Nominal
- percent
- Salary Increases
- From 1991 through 1997 00 percent 0.00
percent
- From 1998 through 2003 00 percent 0.70
percent
- 2004 and beyond 00 percent 2.30 percent
3.00 percent
3.70 percent
5.30 percent
- Increases in Social Security Constants
- Increases of Pensions in Payment
0.00 percent 0.00
percent
0.00 percent 0.00
percent
Table V
3.00 percent
0.00 percent
Probability of Death during Age x
| Age x | Males | Females | Age x | Males | < U> Females | |||||||||||||||
| 0 | 0.013178 | 0.010056 | 50 | 0.005972 | 0.004089 | |||||||||||||||
| 1 | 0.001112 | 0.001058 | 51 | 0.006549 | 0.004565 | |||||||||||||||
| 2 | 0.000845 | 0.000669 | 52 | 0.006765 | 0.005069 | |||||||||||||||
| 3 | 0.000571 | 0.000407 | 53 | 0.007812 | 0.005232 | |||||||||||||||
| 4 | 0.000579 | 0.000550 | 54 | 0.008082 | 0.006173 | |||||||||||||||
| 5 | 0.000587 | 0.000418 | 55 | 0.008807 | 0.006380 | |||||||||||||||
| 6 | 0.000447 | 0.000282 | 56 | 0.009580 | 0.007010 | |||||||||||||||
| 7 | 0.000453 | 0.000286 | 57 | 0.009938 | 0.007259 | |||||||||||||||
| 8 | 0.000613 | 0.000290 | 58 | 0.011297 | 0.008403 | |||||||||||||||
| 9 | 0.000467 | 0.000295 | 59 | 0.012245 | 0.009170 | |||||||||||||||
| 10 | 0.000316 | 0.000149 | 60 | 0.013786 | 0.009519 | |||||||||||||||
| 11 | 0.000482 | 0.000303 | 61 | 0.014349 | 0.010875 | |||||||||||||||
| 12 | 0.000489 | 0.000308 | 62 | 0.016092 | 0.011311 | |||||||||||||||
| 13 | 0.000663 | 0.000313 | 63 | 0.017964 | 0.012841 | |||||||||||||||
| 14 | 0.000842 | 0.000635 | 64 | 0.018750 | 0.013385 | |||||||||||||||
| 15 | 0.000855 | 0.000645 | 65 | 0.020888 | 0.015125 | |||||||||||||||
| 16 | 0.001043 | 0.000819 | 66 | 0.022526 | 0.015805 | |||||||||||||||
| 17 | 0.001237 | 0.000832 | 67 | 0.024303 | 0.016550 | |||||||||||||||
| 18 | 0.001078 | 0.000845 | 68 | 0.026237 | 0.018679 | |||||||||||||||
| 19 | 0.001462 | 0.000859 | 69 | 0.028346 | 0.020308 | |||||||||||||||
| 20 | 0.001301 | 0.000873 | 70 | 0.031457 | 0.022811 | |||||||||||||||
| 21 | 0.001324 | 0.000888 | 71 | 0.034002 | 0.024787 | |||||||||||||||
| 22 | 0.001540 | 0.000903 | 72 | 0.038567 | 0.028548 | |||||||||||||||
| 23 | 0.001568 | 0.000735 | 73 | 0.041667 | 0.031814 | |||||||||||||||
| 24 | 0.001596 | 0.000935 | 74 | 0.046059 | 0.036265 | |||||||||||||||
| 25 | 0.001626 | 0.000952 | 75 | 0.052916 | 0.042025 | |||||||||||||||
| 26 | 0.001657 | 0.000970 | 76 | 0.057078 | 0.046324 | |||||||||||||||
| 27 | 0.001479 | 0.000790 | 77 | 0.063932 | 0.051010 | |||||||||||||||
| 28 | 0.001723 | 0.001007 | 78 | 0.068966 | 0.056117 | |||||||||||||||
| 29 | 0.001978 | 0.001026 | 79 | 0.086025 | 0.063473 | |||||||||||||||
| 30 | 0.001794 | 0.001047 | 80 | 0.094400 | 0.078463 | |||||||||||||||
| 31 | 0.002060 | 0.001282 | 81 | 0.103475 | 0.086025 | |||||||||||||||
| 32 | 0.001871 | 0.001090 | 82 | 0.113013 | 0.094400 | |||||||||||||||
| 33 | 0.002151 | 0.001335 | 83 | 0.123025 | 0.103475 | |||||||||||||||
| 34 | 0.002198 | 0.001137 | 84 | 0.134063 | 0.113013 | |||||||||||||||
| 35 | 0.002248 | 0.001394 | 85 | 0.146400 | 0.123025 | |||||||||||||||
| 36 | 0.002301 | 0.001425 | 86 | 0.158963 | 0.134063 | |||||||||||||||
| 37 | 0.002355 | 0.001458 | 87 | 0.171350 | 0.146400 | |||||||||||||||
| 38 | 0.002680 | 0.001492 | 88 | 0.184100 | 0.158963 | |||||||||||||||
| 39 | 0.002473 | 0.001782 | 89 | 0.198350 | 0.171350 | |||||||||||||||
| 40 | 0.002817 | 0.002085 | 90 | 0.214613 | 0.184100 | |||||||||||||||
| 41 | 0.003178 | 0.001870 | 91 | 0.232125 | 0.198350 | |||||||||||||||
| 42 | 0.003262 | 0.002464 | 92 | 0.250288 | 0.214613 | |||||||||||||||
| 43 | 0.003351 | 0.002247 | 93 | 0.268688 | 0.232125 | |||||||||||||||
| 44 | 0.003756 | 0.002594 | 94 | 0.287200 | 0.250288 | |||||||||||||||
| 45 | 0.003862 | 0.002959 | 95 | 0.304225 | 0.268688 | |||||||||||||||
| 46 | 0.004305 | 0.003040 | 96 | 0.320463 | 0.287200 | |||||||||||||||
| 47 | 0.004772 | 0.003125 | 97 | 0.335850 | 0.304225 | |||||||||||||||
| 48 | 0.004916 | 0.003536 | 98 | 0.350375 | 0.320463 | |||||||||||||||
| 49 | 0.005429 | 0.003970 | 99 | 0.350375 | 0.335850 | |||||||||||||||
Table VI
Distribution of Cuban Population by Age Groups from 1991 to 2010
| Year | 14 and Younger | 15 to Retirement Age | Over Retirement Total Age |
| 1991 | 2426272 | 6775630 | 1492567 10694469 |
| 1992 | 2433172 | 6848651 | 1540504 10822327 |
| 1993 | 2460933 | 6,901,117 | 1,584,926 10946976 |
| 1994 | 2505121 | 6936494 | 1625859 11067474 |
| 1995 | 2551593 | 6967613 | 1663370 11182576 |
| 1996 | 2600644 | 6993256 | 1697558 11291458 |
| 1997 | 2646705 | 7002529 | 1744458 11393692 |
| 1998 | 2666006 | 7034287 | 1788185 11488478 |
| 1999 | 2676698 | 7071031 | 1828937 11576666 |
| 2000 | 2682959 | 7108473 | 1866948 11658380 |
| 2001 | 2670417 | 7161002 | 1902444 11733863 |
| 2002 | 2668923 | 7186858 | 1948149 11803930 |
| 2003 | 2650064 | 7225799 | 1991709 11867572 |
| 2004 | 2619155 | 7273888 | 2033345 11926388 |
| 2005 | 2589748 | 7318509 | 2073271 11981528 |
| 2006 | 2559033 | 7362760 | 2111660 12033453 |
| 2007 | 2523906 | 7401029 | 2157922 12082857 |
| 2008 | 2487216 | 7439683 | 2202851 12129750 |
| 2009 | 2450516 | 7477742 | 2246545 12174803 |
| 2010 | 2415894 | 7513894 | 2289045 12218833 |
Ratio of Working Age (15 to Retirement Age) Population to Population Group
| Year | 14 and Younger | 15 to Retirement Age | Over Retirement Age | Total | ||||
| 1991 | 2.79 | 1 | 4.54 | 0.63 | ||||
| 1992 | 2.81 | 1 | 4.45 | 0.63 | ||||
| 1993 | 2.8 | 1 | 4.35 | 0.63 | ||||
| 1994 | 2.77 | 1 | 4.27 | 0.63 | ||||
| 1995 | 2.73 | 1 | 4.19 | 0.62 | ||||
| 1996 | 2.69 | 1 | 4.12 | 0.62 | ||||
| 1997 | 2.65 | 1 | 4.01 | 0.61 | ||||
| 1998 | 2.64 | 1 | 3.93 | 0.61 | ||||
| 1999 | 2.64 | 1 | 3.87 | 0.61 | ||||
| 2000 | 2.65 | 1 | 3.81 | 0.61 | ||||
| 2001 | 2.68 | 1 | 3.76 | 0.61 | ||||
| 2002 | 2.69 | 1 | 3.69 | 0.61 | ||||
| 2003 | 2.73 | 1.00 | 3.63 | 0.61 | ||||
| 2004 | 2.78 | 1.00 | 3.58 | 0.61 | ||||
| 2005 | 2.83 | 1.00 | 3.53 | 0.61 | ||||
| 2006 | 2.88 | 1.00 | 3.49 | 0.61 | ||||
| 2007 | 2.93 | 1 | 3.43 | 0.61 | ||||
| 2008 | 2.99 | 1 | 3.38 | 0.61 | ||||
| 2009 | 3.05 | 1 | 3.33 | 0.61 | ||||
| 2010 | 3.11 | 1 | 3.28 | 0.61 | ||||
Table VII
Contributions as a Percentage of Salary of Active Participants in Social Security System Retirement at Age 60 for men, 55 for women
(All Amounts in Billions of Pesos)
1991 1995 2000 2005 2010
- Socialist Stasis Scenario
- Present Value of Future Benefits
| 1. Active Participants | 146 | 152.6 | 158.7 | 166.8 | 174.6 |
| 2. Current Pensioners | 24.7 | 24.9 | 27.5 | 30.5 | 33.5 |
| 3. Total | 170.7 | 177.5 | 186.2 | 197.3 | 208.1 |
- Present Value of Future Salaries 3 223.2 216.1 214 213.1
- Contribution as a Percentage of Salary
- For Active Participants
64 68
73 78 percent 82
Future Benefits
percent percent percent
percent
- For Current Pensioners
11 11
13 14 percent< 16
Future Benefits
percent percent percent
/TD> percent
- Total 74
80 86
92 percent 98
percent percent percent percent
- Caribbean Basin Initiative-Real Scenario
- Present Value of Future Benefits
| 1. Active Participants | 25.5 | 29.7 | 34.3 | 39.9 | 46.3 |
| 2. Current Pensioners | 14.3 | 14.9 | 16.7 | 18.6 | 21 |
| 3. Total | 39.8 | 44.6 | 51 | 58.5 | 67.3 |
- Present Value of Future Salaries 5 122.2 131.2 145.8 163.5
- Contribution as a Percentage of Salary
- For Active Participants
22 24
26 27 percent 28
Future Benefits
percent percent percent
percent
- For Current Pensioners
12 12
13 13 percent< 13
Future Benefits
percent percent percent
/TD> percent
- Total 34
36 39
40 percent 41
percent percent percent percent
III ) Caribbean Basin Initiative-US$ Nominal Scenario
- Present Value of Future Benefits
| 1. Active Participants | 19.6 | 25.5 | 34 | 45.4 | 60.4 |
| 2. Current Pensioners | 11.7 | 12.6 | 14.7 | 17.7 | 22.3 |
| 3. Total | 31.3 | 38.1 | 48.7 | 63.1 | 82.7 |
- Present Value of Future Salaries 117 5 170 217.2 280.1
- Contribution as a Percentage of Salary
- For Active Participants Future Benefits
17
percent
19
percent
20
percent
21 22
percent percent
- For Current Pensioners Future Benefits
10
percent
9
percent
9
percent
8
percent
8
percent
- Total 27
percent
28
percent
29
percent
29
percent
30
percent
Table VIII
Contributions as a Percentage of Salary of Active Participants in Social Security System Retirement at Age 65 for both men and women
(All Amounts in Billions of Pesos)
1991 1995 2000 2005 2010
- Socialist Stasis Scenario
- Present Value of Future Benefits
| 1. Active Participants | 115.6 | 120.2 | 123.8 | 128.5 | 133 |
| 2. Current Pensioners | 24.7 | 19.2 | 15.4 | 15.9 | 18 |
| 3. Total | 140.3 | 139.4 | 139.2 | 144.4 | 151 |
- Present Value of Future Salaries 3 264.7 242.1 237.3 241.3
- Contribution as a Percentage of Salary
- For Active Participants Future Benefits
41
percent
45
percent
51
percent
54 55
percent percent
- For Current Pensioners Future Benefits
9
percent
7
percent
6
percent
7
percent
7
percent
- Total 50
percent
53
percent
57
percent
61
percent
63
percent
- Caribbean Basin Initiative-Real Scenario
- Present Value of Future Benefits
| 1. Active Participants | 16.6 | 21.3 | 27.2 | 32.2 | 37 |
| 2. Current Pensioners | 14.3 | 11.9 | 10.1 | 10.6 | 12.5 |
| 3. Total | 30.9 | 33.2 | 37.3 | 42.8 | 49.5 |
- Present Value of Future Salaries 7 137 140.9 153.2 172.6
- Contribution as a Percentage of Salary
- For Active Participants Future Benefits
13
percent
16
percent
19
percent
21 21
percent percent
- For Current Pensioners Future Benefits
11
percent
9
percent
7
percent
7
percent
7
percent
- Total 23
percent
24
percent
26
percent
28
percent
29
percent
III ) Caribbean Basin Initiative-US$ Nominal Scenario
- Present Value of Future Benefits
| 1. Active Participants | 13.4 | 19.1 | 28.2 | 38.5 | 51 |
| 2. Current Pensioners | 11.7 | 9.9 | 8.8 | 10.3 | 13.8 |
| 3. Total | 25.1 | 29 | 37 | 48.8 | 64.8 |
- Present Value of Future Salaries 4 154.5 183.2 229.4 297.3
- Contribution as a Percentage of Salary
- For Active Participants Future Benefits
10
percent
12
percent
15
percent
17 17
percent percent
- For Current Pensioners Future Benefits
9
percent
6
percent
5
percent
4
percent
5
percent
- Total 19
percent
19
percent
20
percent
21
percent
22
percent
Table IX
Contributions as a Percentage of Salary of Active Participants in Social Security System Retirement at Age 65 and excluding Participants younger than 45 on January 1, 1995 (All Amounts in Billions of Pesos)
1991 1995 2000 2005 2010
- Socialist Stasis Scenario
- Present Value of Future Benefits
| 1. Active Participants | 33.2 | 33.2 | 30.5 | 23.2 | 13.3 |
| 2. Current Pensioners | 24.7 | 19.2 | 15.4 | 15.9 | 18 |
| 3. Total | 57.9 | 52.4 | 45.9 | 39.1 | 31.3 |
- Present Value of Future Salaries 3 264.7 242.1 237.3 241.3
- Contribution as a Percentage of Salary
- For Active Participants Future Benefits
12
percent
13
percent
13
percent
10 6
percent percent
- For Current Pensioners Future Benefits
9
percent
7
percent
6
percent
7
percent
7
percent
- Total 21
percent
20
percent
19
percent
16
percent
13
percent
- Caribbean Basin Initiative-Real Scenario
- Present Value of Future Benefits
| 1. Active Participants | 8.3 | 10.5 | 12.3 | 11.5 | 8.1 |
| 2. Current Pensioners | 14.3 | 11.9 | 10.1 | 10.6 | 12.5 |
| 3. Total | 22.6 | 22.4 | 22.4 | 22.1 | 20.6 |
- Present Value of Future Salaries 7 137 140.9 153.2 172.6
- Contribution as a Percentage of Salary
- For Active Participants Future Benefits
6 8 9 8 5
percent percent percent percent percent
- For Current Pensioners
11percen 9
7 7 7
Future Benefits percent percent percent percent
- Total 17
16 16
14 12
percent percent percent percent percent III ) Caribbean Basin Initiative-US$ Nominal Scenario
- Present Value of Future Benefits
| 1. Active Participants | 6.5 | 9.2 | 12.5 | 13.4 | 10.8 |
| 2. Current Pensioners | 11.7 | 9.9 | 8.8 | 10.3 | 13.8 |
| 3. Total | 18.2 | 19.1 | 21.3 | 23.7 | 24.6 |
- Present Value of Future Salaries 4 154.5 183.2 229.4 297.3
- Contribution as a Percentage of Salary
- For Active Participants 5 6 7 6 4
Future Benefits
percent
percent
percent
percent percent
- For Current Pensioners 9 6 5 4 5
Future Benefits
percent
percent
percent
percent percent
- Total 14 12 12 10 8
Table X
percent
percent
percent
percent percent
Total Pensions as a Percentage of Total Salaries for Selected Years Retirement at Age 65 for both Men and Women
(All Amounts in Billions of Pesos)
1991 1995 2000 2005 2010
- Socialist Stasis Scenario
| A, Total Pensions | 1397 | 1325 | 1333 | 1507 | 1712 | |
| B. Total Salaries | 7765 | 8668 | 9267 | 9299 | 9237 | |
| C. Pensions as a Percentage of | 18 | 15 | 14 | 16 | 19 |
Salaries
percent
percent
percent
percent
percent
- Caribbean Basin Initiative-Real Scenario
| A, Total Pensions | 1397 | 1325 | 1333 | 1515 | 1767 | |
| B. Total Salaries | 7765 | 8668 | 9332 | 9851 | 10963 | |
| C. Pensions as a Percentage of | 18 | 15 | 14 | 15 | 16 |
Salaries
percent
percent
percent
percent
percent
III Caribbean Basin Initiative-US$ Nominal Scenario
| A, Total Pensions | 1397 | 1325 | 1367 | 1708 | 2279 | |
| B. Total Salaries | 7765 | 9752 | 12162 | 14834 | 19025 | |
| C. Pensions as a Percentage of | 18 | 14 | 11 | 12 | 12 |
Salaries
percent
percent
percent
percent
percent
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