Concept in Definition ABC

The term we analyze is frequently used in Latin America and generally refers to the different models of retirement pensions, but also refers to disability or widowhood pensions. Although the word pension is not currently used in Spain in relation to pensions, it should be noted that formerly there was the National Pension Institute, a institution created at the end of the 19th century so that retiring workers could have a pension.

Why are pension systems called social security?

In most countries, the monthly salary received by a worker is accompanied by a quota that is paid at the administration, specifically to a pension fund of the social Security. The amount of this fee allows retired people to receive a pension. In this way, those who work collaborate with the retirements of those who no longer work and when they leave their work activity those who work are the ones who will contribute their effort for the retirees.

Consequently, in the payment of pensions there is a provision mechanism in two senses:

1) it is foreseeable that the active worker will become retired in the future and,

2) the state must foresee in the present the payment of pensions in the future.

On the other hand, in a pension system (related to old age, death or the disability situation) a projection is made so that future uncertainties are minimize.

Pension pension systems generate intense social debate

Before the appearance of pension systems, people who stopped working were supported by their own savings or the help of their families. This situation generated bags of poverty between the elderly and a injustice obvious social. The idea of ​​the safety Social security as a pension system emerged in Germany in the 19th century and eventually spread to most countries.

There is a permanent debate on which forecasting system is the most appropriate and on what should be the origin of the economic resources to maintain the system.

There are two different models regarding the financing of pensions:

1) a contributory system in which future pensioners are the ones who pay their pension during their work stage,

2) a non-contributory system, in the sense that one does not pay his future pension but rather pays the pension of the retirees.

On the other hand, the pension system raises a debate in relation to the role that the state should have (to For some, the state should be a supervisor of the system and for others, the state has to be the one who manages and administers the pensions).

Photos: Fotolia - mast3r / aleutie

Social Security Topics