The distributional impact of contributory pensions. An application to the Uruguayan case

Resumen

Assessing the distributional effects of pensions is complex since individuals contribute to pension funding. We compare the expected present value of benefits net of direct contributions with a hypothetical scenario with no pension program, where individuals would save their payroll taxes in an individual fund and, upon retirement,
purchase a life annuity. Our analysis shows that the Uruguayan pension program negatively impacts the poorest retirees, particularly younger males outside the major urban centers. These findings are closely tied to social security regulations.