Incentivos al trabajo y cobertura de riesgos de los programas de pensiones: el caso de Uruguay

In a paper on pension plans in eleven Latin American countries, Forteza and Ourens (2011) report two remarkable results: the rates of return are not sensitive to retirement ages if the number of years of service remains constant, and there are large discontinuities in the rates of return associated to small changes in the length of service, mainly due to vesting period conditions. The present paper, with the same methodology - micro simulations of the flows of contributions and benefits that the pension plan promises a representative worker-, but applied to the Uruguayan case, explores in more detail the incentives to work and risk coverage to confirm or refute these previous findings. Regarding retirement ages, my results contradict previous findings, in that the rate of return is sensitive to the age of retirement in certain cases and especially after individuals have generated the right to claim pensions. Regarding length of service, I confirm that there are discontinuities in the internal rates of return and show some cases that help to understand the mechanics. Additionally, I verify that the Uruguayan regime generates incentives to leave work once individuals meet the minimum requirements to access benefits, and that a recent reform in 2008 partly smoothed the discontinuities in the returns, and therefore reduced the risk faced by workers in the event of early retirement.