When people give up money in order to save for the upcoming, the least they expect to have in the future is the same amount of capital or more, not less. The Bismarckian pension system, diffused all over the world, nowadays works exactly the opposite. Beneficiaries are not getting what they expect making this collective capitalization scheme bear with all kinds of difficulties.
It faces a political problem given that the government has the monopoly of the Social Security and it occasionally uses the workers’ money for political purposes. The monthly contributions workers make by law go to a common fund that governments are meant to merely “administrate”, but that sometimes they employ for other purposes leaving no funds for the future.
In Ecuador, for example, the government has always counted on this fund to invest in public bonds or whatever other investment the incumbent administration chooses. Certainly, employees feel entitled to all the benefits that politicians have promised them, but sometimes they don’t get them. For instance, in order to extend the submission of benefits to workers, Spain is one of many countries to recently strategically plan for baby boomers by delaying pension collection. This is an example of measures governments take when they don’t have the payback. Currently, the U.S. is short $1.26 trillion in paying for public employee pensions and other retirement benefits.
Also, the system deals with a demographical trouble as the world’s trend is to have aging societies: while born rates are decreasing, medicine and technology is extending life expectancy. This results in less active workers contributing to the financing of an increasing demand on elderly pensions.