Pension and Retirement Board of the National Teachers' Union
Costa Rica

Self-balancing formula for Collective Capitalization System

Implementation year

Since 2016, Costa Rica’s Pension and Retirement Board of the National Teachers’ Union (Junta de Pensiones y Jubilaciones del Magisterio Nacional – JUPEMA) has established a self‑balancing formula for its defined-benefit Collective Capitalization System (Régimen de Capitalización Colectiva – RCC), which facilitates the setting of investment targets related to fund solvency, as well as the Board of Directors’ decision-making.

The formula is geared towards achieving the theoretical return that the fund needs to yield in order to keep the scheme solvent and be able to grant pension increases in line with inflation. This return is known as the actuarial target rate and is used to define the investment strategy.

If this actuarial target rate is not reached, the self-balancing mechanism is activated, granting below-inflation increases in a proportional manner, so as to avoid a disproportionate intergenerational surcharge on younger generations of workers.

Implementation of this self-balancing formula is regulated by a revaluation policy that was approved in 2020.